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Discrete-time risk models with surplus-dependent premium corrections

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  • Osatakul, Dhiti
  • Li, Shuanming
  • Wu, Xueyuan

Abstract

This paper studies discrete-time risk models with insurance premiums adjusted according to claims experience. The premium correction mechanism follows the well-known principle in the non-life insurance industry, the so-called bonus-malus system. The bonus-malus framework that we study here extends the current literature by allowing the premium correction rules to vary according to the current surplus level of the insurance company. The main goal of this paper is to evaluate the risk of ruin for the insurer who implements the proposed bonus-malus system. Two premiums correction principles are examined: by aggregate claims or by claim frequency. Further, the Parisian type of ruin is also considered, where the premium adjustment rules are different in positive- and negative-surplus environment.

Suggested Citation

  • Osatakul, Dhiti & Li, Shuanming & Wu, Xueyuan, 2023. "Discrete-time risk models with surplus-dependent premium corrections," Applied Mathematics and Computation, Elsevier, vol. 437(C).
    • Handle: RePEc:eee:apmaco:v:437:y:2023:i:c:s0096300322005690
    DOI: 10.1016/j.amc.2022.127495
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    References listed on IDEAS

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