Risk aggregation and stochastic claims reserving in disability insurance
2014 (English)In: Insurance, Mathematics & Economics, ISSN 0167-6687, E-ISSN 0617-6687, Vol. 59, 100-108 p.Article in journal (Refereed) Published
We consider a large, homogeneous portfolio of life or disability annuity policies. The policies are assumed to be independent conditional on an external stochastic process representing the economic-demographic environment. Using a conditional law of large numbers, we establish the connection between claims reserving and risk aggregation for large portfolios. Further, we derive a partial differential equation for moments of present values. Moreover, we show how statistical multi-factor intensity models can be approximated by one-factor models, which allows for solving the PDEs very efficiently. Finally, we give a numerical example where moments of present values of disability annuities are computed using finite-difference methods and Monte Carlo simulations.
Place, publisher, year, edition, pages
2014. Vol. 59, 100-108 p.
Disability insurance, stochastic intensities, condition al independence, risk aggregation, stochastic claims reserving
Probability Theory and Statistics
IdentifiersURN: urn:nbn:se:kth:diva-136257DOI: 10.1016/j.insmatheco.2014.09.001ISI: 000347501100010ScopusID: 2-s2.0-84907835403OAI: oai:DiVA.org:kth-136257DiVA: diva2:675643
QC 20150209. Updated from manuscript to article in journal.2013-12-042013-12-042015-10-12Bibliographically approved