Impact of underwriting cycles on the solvency of an insurance company

Détails

ID Serval
serval:BIB_962B490794FA
Type
Article: article d'un périodique ou d'un magazine.
Collection
Publications
Institution
Titre
Impact of underwriting cycles on the solvency of an insurance company
Périodique
North American Actuarial Journal
Auteur(s)
Trufin J., Albrecher H., Denuit M.
ISSN
1092-0277
Statut éditorial
Publié
Date de publication
2009
Peer-reviewed
Oui
Volume
13
Numéro
3
Pages
385-403
Langue
anglais
Résumé
This paper studies the solvency of an insurance firm in the presence of underwriting cycles. A small or medium-size insurance company with a price-taker position in the market is considered. Its premium income is assumed to obey an autoregressive process with cycles. Specifically, the premium income for a specific calendar year is influenced by the market experience for the last couple years. Under this classical AR(2) dynamics governing the premium income, an explicit expression for the ultimate ruin probability is derived, using a martingale approach, in the lighttailed claims case. Furthermore, the logarithmic asymptotic behavior of the ultimate ruin probability as well as the typical path to ruin are investigated. Then a comparison is made with the classical case where the same company operates on a market without such cycles. Asymptotically, the presence of market cycles is shown to increase the risk for the company. Numerical illustrations are performed on Canadian motor insurance market data and support the theoretical analysis.
Création de la notice
10/11/2009 10:22
Dernière modification de la notice
20/08/2019 14:58
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