THE DETERMINATION OF THE EXCESS OF LOSS CATASTROPHE REINSURANCE PREMIUM USING THE EXPECTED VALUE PRINCIPLE AND VALUE-AT-RISK: CASE STUDY OF THE NATURAL DISASTERS DATA IN INDONESIA FOR YEARS 2000-2019
Indonesia is one country which is prone to natural disasters. In the event of a natural disaster, a life insurance company may transfer some of its risk to a reinsurance company by purchasing a reinsurance product, for example, a Catastrophe Excess of Loss (Cat XL), and pays a compensation to the re...
Saved in:
| Main Author: | |
|---|---|
| Format: | Final Project |
| Language: | Indonesia |
| Online Access: | https://digilib.itb.ac.id/gdl/view/55199 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| Institution: | Institut Teknologi Bandung |
| Language: | Indonesia |
| Summary: | Indonesia is one country which is prone to natural disasters. In the event of a natural disaster, a life insurance company may transfer some of its risk to a reinsurance company by purchasing a reinsurance product, for example, a Catastrophe Excess of Loss (Cat XL), and pays a compensation to the reinsurance company in the form of a reinsurance premium. In this Final Project, a model for determining a Cat XL reinsurance premium is discussed, using as a case study, the data on natural disasters in Indonesia and the data on the number of people died caused by the natural disasters in the years 2000-2019, taken from the website of Badan Nasional Penanggulangan Bencana (BNPB). The number of natural disasters in Indonesia which cause at least m people died is assumed to have a Poisson distribution; the number of people died in the natural disasters given at least m people died is modeled by a Discrete Generalized Pareto distribution; the number of claims reported to a life insurance company caused by the natural disaster are assumed to have a Beta-Binomial distribution; and the claims severity is assumed to follow an exponential distribution. Using a Monte Carlo simulation, the Cat XL reinsurance premiums are determined using two risk measures, namely: the Expected Value Principle (EVP) and the Value-at-Risk (VaR). |
|---|