SIMULATION AND ANALYSIS OF INSURANCE RUIN PROBABILITY IN DISCRETE TIME WITH RISKY INVESTMENT AND LOAN ACTIVITIES
The insurance business has undergone significant evolution from the concept of mutual assistance within communities in the 17th century to the modern complexity of the present era. This development has involved insurance companies in various financial activities such as dividend distribution, inv...
Saved in:
| Main Author: | |
|---|---|
| Format: | Final Project |
| Language: | Indonesia |
| Online Access: | https://digilib.itb.ac.id/gdl/view/81668 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| Institution: | Institut Teknologi Bandung |
| Language: | Indonesia |
| Summary: | The insurance business has undergone significant evolution from the concept of
mutual assistance within communities in the 17th century to the modern complexity
of the present era. This development has involved insurance companies in various
financial activities such as dividend distribution, investments, and loan activities.
However, despite providing financial protection, the insurance business also faces
the risk of bankruptcy or ruin, which needs to be addressed with effective risk
management. This research aims to analyze the probability of ruin in modern
insurance business by developing a model developed by Kim and Drekic (2016).
The calculations involve recursive methods that incorporate company surplus,
external funds, ruin time, and time since the last claim, which change over iterations
of time in the recursive process. The results reveal that selecting appropriate
investments can reduce the risk of ruin. Additionally, increasing the debt limit as an
option when external funds are depleted can also help mitigate the risk of ruin. |
|---|