THE DETERMINATION OF THE EXCESS OF LOSS CATASTROPHE REINSURANCE PREMIUM USING THE EXPECTED VALUE PRINCIPLE AND STANDARD DEVIATION PRINCIPLE USING RISK MEASUREMENT TAIL-VALUE-AT-RISK : CASE STUDY OF THE NATURAL DISASTERS DATA IN INDONESIA FOR YEARS 1900-2021

• Main Author: ARIHTA BANGUN, DEBORA
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/65307
• Institution: Institut Teknologi Bandung

The Pacific Ring of Fire is an area where three of the world's tectonic plates meet, such as the Indo-Australian Plate, the Eurasian Plate, and the Pacific Plate. Indonesia is a country that is included in it so Indonesia is often affected by natural disasters that cannot be predicted. So, if a natural disaster occurs that causes a large loss of life, the insurance company needs to prepare a large number of funds to pay the claim to be submitted. In practice, insurance companies enter into Cooperation agreements with Reinsurance Companies in dealing with a large number of claims within a period. In this Final Project, the Reinsurance Contract that will be discussed is Catastrophe Excess of Loss (Cat XL). In modeling the determination of the reinsurance contract premium, several stages are needed, namely determining natural disaster events that can be categorized as catastrophic events using the Peaks Over Threshold method based on the number of people who died. Furthermore, many people die every natural disaster event which is categorized as a Catastrophic Event with a Discrete Generalized Pareto Distribution distribution. The number of catastrophic events that occur in a period is assumed to have a Poisson distribution with prior exponential distribution. Not everyone who dies has life insurance, so the number of people who die who can make a claim is assumed to have a Beta-Binomial distribution and the number of claims submitted by each person is assumed to be a exponensial distribution. Based on these assumptions, the total amount of claims borne by reinsurance companies can be determined. In this Final Project, data on natural disasters in Indonesia will be used including the number of people who died, the time of occurrence, and the location from 1900 to 2021. The determination of the reinsurance premium for the Cat XL reinsurance contract is determined through a Monte Carlo simulation and uses the Expected Value Principle, the Standard risk measure. Deviation Principle and Tail-Valueat- Risk.