Volume 9, Issue 2 -

In this paper, we develop a methodology to model the risk of losses resulting from a natural disaster in which the intensity parameter of the non-homogeneous Poisson process has an upward trend and a seasonal component. We apply this model to losses due to floods in the Financial Assistance Program of the Government of Quebec (Canada). We use the historically observed risk premiums to assess the financial costs for the government if it had issued such instruments to hedge risk linked to floods.

Many empirical studies have been carried out in developed and emerging markets using methods to account for extreme market risk. A front-runner in the methods used is Extreme Value Theory (EVT). In this study, these methods are applied to the All Share Price Index (ASPI) of the Colombo Stock Exchange (CSE) to obtain risk forecasts for VaR (Value at Risk) and ES (Expected Shortfall) at 99% confidence level. Recognizing the merits of both conditional and unconditional models for risk measures the most suitable unconditional model and conditional model are found for the ASPI. Contrary to other studies the Historical Simulation method was found to be more appropriate for obtaining static estimates than the static EVT model. The Two-Step Approach of McNeil and Frey which combines EVT and Generalized Auto-Regressive Conditional Heteroskedasticity (GARCH) methodologies was found to be the most appropriate conditional model. Backtesting of models is done using a binomial test, Christoferssen’s conditional coverage test and McNeil and Frey’s ES test.

The policy-based insurance has an important significance to guarantee wheat production, maintain food security and stabilize farmers’ incomes. Pricing for wheat insurance and the risk regionalization are the basis for the smooth development of wheat insurance, especially for Henan province which is the largest wheat production area of China. Therefore, first, the premium rate is calculated using parametric method. Second, the comprehensive wheat production risk scores of all cities in Henan province are calculated through factor analysis, considering the risk exposure in wheat production, the local government’s financial supporting ability, farmers’ economic ability and expected yield loss rate. In addition, the cities are regionalized with method of cluster analysis as well. In addition, it brings out some suggestions to promote the development of policy-based wheat insurance of Henan province.

In this article, we propose a model consisting of an insurance distribution channel compensation scheme, paying special attention to the insurer’s choice of distribution system in both single-period and multi-period settings. We find that the risk factor is the key element in both the insurer’s choice of distribution channel and the distribution channel compensation scheme. The advantage of having an independent underwriter is mainly manifested in lines of business that are more risky. Our analysis suggests that a profit-sharing contingent-commission scheme serves as a risk-sharing mechanism and is especially effective with risky business lines.

Actuarial valuations of social insurance pension schemes continue to be carried out almost exclusively on traditional, deterministic lines, despite certain advantages of stochastic valuations. The few instances, that there are of such valuations, have been based on the simulation methodology, which is computer-intensive and requires extensive data. It is believed that the analytical approach may provide a simpler alternative and therefore encourage the spread of stochastic valuations. This paper refines the theoretical basis of an existing analytical valuation model, and generalizes the projection formulae to accommodate several inter-correlated stochastic factors. A stochastic valuation of an on-going retirement pension scheme is illustrated. It is hoped that the paper will stimulate further theoretical and practical research, and eventually lead to the spread of stochastic valuations in social security.

This paper obtains the uniform tail asymptotics of the maximum of randomly weighted sum max1≤k≤n∑i=1kθiXi$$\mathop {\max}\limits_{1 \le k \le n} \sum\nolimits_{i = 1}^k {\theta _i}{X_i}$$ with respective to n , in which the primary random variables X1,...,Xn$${X_1},...,{X_n}$$ are real valued, dependent, and have different subexponential distributions, while the random weights θ1,...,θn$${\theta _1},...,{\theta _n}$$ are nonnegative and arbitrarily dependent, but independent of X1,...,Xn$${X_1},...,{X_n}$$. An application to insurance risk model with investment portfolio is proposed.