THE APPLICATION OF PEAKS OVER THRESHOLD IN DETERMINING A CLAIM RESERVE IN EARTHQUAKE INSURANCE

• Main Author: JANUARI SITUMEANG , RADIAN
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/30097
• Institution: Institut Teknologi Bandung

<p align="justify">Financial losses caused by earthquakes need to be mitigated; one way is through insurance. General insurance companies which sell insurance products against earthquake disaster need to measure the financial risk due to earthquakes. For a general insurance company, this relates to the claim reserve which need to be determined. The Peaks Over Threshold (POT), which is one methodology in the extreme value theory, could be applied to measure the risk of financial losses, which in turn could be used to determine the claim reserve of an insurance against earthquakes. In this thesis, the POT approach is used in analyzing claims severity data on property damage and business interruption caused by tectonic and volcanic earthquakes, from the year 2004 to 2015, of a general insurance company. With a significance level of ?=0.05, the data could be modeled by a Generalized Pareto distribution with parameters ? ?=2.9193 , ? ?=93,797,590.59, and threshold u=30,587,366.00. The Value-at-Risk (VaR) risk measure is used to determine the value above which are considered risky. As an illustration, a scheme of claim reserves is made based on some VaR values.<p align="justify">