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Property insurance loss distributions

Author

Listed:
  • Burnecki, Krzysztof
  • Kukla, Grzegorz
  • Weron, Rafał

Abstract

Property claim services (PCS) provides indices for losses resulting from catastrophic events in the US. In this paper, we study these indices and take a closer look at distributions underlying insurance claims. Surprisingly, the lognormal distribution seems to give a better fit than the Paretian one. Moreover, lagged autocorrelation study reveals a mean-reverting structure of indices returns.

Suggested Citation

  • Burnecki, Krzysztof & Kukla, Grzegorz & Weron, Rafał, 2000. "Property insurance loss distributions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 287(1), pages 269-278.
    • Handle: RePEc:eee:phsmap:v:287:y:2000:i:1:p:269-278
    DOI: 10.1016/S0378-4371(00)00453-2
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    References listed on IDEAS

    as
    1. Mantegna,Rosario N. & Stanley,H. Eugene, 2007. "Introduction to Econophysics," Cambridge Books, Cambridge University Press, number 9780521039871, September.
    2. Weron, Rafal & Przybyłowicz, Beata, 2000. "Hurst analysis of electricity price dynamics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 283(3), pages 462-468.
    3. Burnecki, Krzysztof & Kukla, Grzegorz & Weron, Rafał, 2000. "Property insurance loss distributions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 287(1), pages 269-278.
    4. Weron, Rafal, 2000. "Energy price risk management," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 285(1), pages 127-134.
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    Citations

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    Cited by:

    1. Tim Keighley & Thomas Longden & Supriya Mathew & Stefan Trück, 2014. "Quantifying Catastrophic and Climate Impacted Hazards Based on Local Expert Opinions," Working Papers 2014.93, Fondazione Eni Enrico Mattei.
    2. Yang‐Che Wu & Ming Jing Yang, 2018. "The effectiveness of asset, liability and equity hedging against catastrophe risk: the cases of winter storms in North America and Europe," European Financial Management, European Financial Management Association, vol. 24(5), pages 893-918, November.
    3. Härdle, Wolfgang Karl & Burnecki, Krzysztof & Weron, Rafał, 2004. "Simulation of risk processes," Papers 2004,01, Humboldt University of Berlin, Center for Applied Statistics and Economics (CASE).
    4. Wang, Guanying & Wang, Xingchun & Shao, Xinjian, 2022. "Exchange options for catastrophe risk management," The North American Journal of Economics and Finance, Elsevier, vol. 59(C).
    5. Chen, Jing & Wei, Hang & Xu, Shujun & Zheng, Chaonan, 2023. "The value of product recall insurance in a price competition with financially constrained suppliers," European Journal of Operational Research, Elsevier, vol. 307(3), pages 1161-1176.
    6. Burnecki, Krzysztof & Kukla, Grzegorz & Weron, Rafał, 2000. "Property insurance loss distributions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 287(1), pages 269-278.
    7. Wu, Yang-Che & Chung, San-Lin, 2010. "Catastrophe risk management with counterparty risk using alternative instruments," Insurance: Mathematics and Economics, Elsevier, vol. 47(2), pages 234-245, October.
    8. Katarzyna Sznajd-Weron & Józef Sznajd, 2000. "Opinion Evolution In Closed Community," International Journal of Modern Physics C (IJMPC), World Scientific Publishing Co. Pte. Ltd., vol. 11(06), pages 1157-1165.
    9. Burnecki, Krzysztof & Misiorek, Adam & Weron, Rafal, 2010. "Loss Distributions," MPRA Paper 22163, University Library of Munich, Germany.
    10. Jo†Yu Wang & Wen†Lin Wu & Yang†Che Wu & Ming Jing Yang, 2017. "How To Manage Long†term Financial Self†sufficiency of a National Catastrophe Insurance Fund? The Feasibility of Three Bailout Programmes," European Financial Management, European Financial Management Association, vol. 23(5), pages 951-974, October.
    11. repec:hum:wpaper:sfb649dp2007-037 is not listed on IDEAS
    12. Wu, Yang-Che, 2015. "Reexamining the feasibility of diversification and transfer instruments on smoothing catastrophe risk," Insurance: Mathematics and Economics, Elsevier, vol. 64(C), pages 54-66.
    13. Chernobai, Anna & Burnecki, Krzysztof & Rachev, Svetlozar & Trueck, Stefan & Weron, Rafal, 2005. "Modelling catastrophe claims with left-truncated severity distributions (extended version)," MPRA Paper 10423, University Library of Munich, Germany.
    14. Giuricich, Mario Nicoló & Burnecki, Krzysztof, 2019. "Modelling of left-truncated heavy-tailed data with application to catastrophe bond pricing," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 525(C), pages 498-513.
    15. Wolfgang Karl Härdle & Brenda López Cabrera, 2010. "Calibrating CAT Bonds for Mexican Earthquakes," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(3), pages 625-650, September.
    16. Krzysztof Burnecki & Joanna Janczura & Rafal Weron, 2010. "Building Loss Models," HSC Research Reports HSC/10/03, Hugo Steinhaus Center, Wroclaw University of Science and Technology.
    17. Anna Chernobai & Krzysztof Burnecki & Svetlozar Rachev & Stefan Trück & Rafał Weron, 2006. "Modelling catastrophe claims with left-truncated severity distributions," Computational Statistics, Springer, vol. 21(3), pages 537-555, December.
    18. Weron, Rafał & Burnecki, Krzysztof, 2004. "Modeling the risk process in the XploRe computing environment," Papers 2004,08, Humboldt University of Berlin, Center for Applied Statistics and Economics (CASE).
    19. Burnecki, Krzysztof & Giuricich, Mario Nicoló & Palmowski, Zbigniew, 2019. "Valuation of contingent convertible catastrophe bonds — The case for equity conversion," Insurance: Mathematics and Economics, Elsevier, vol. 88(C), pages 238-254.
    20. Xingchun Wang, 2016. "The Pricing of Catastrophe Equity Put Options with Default Risk," International Review of Finance, International Review of Finance Ltd., vol. 16(2), pages 181-201, June.
    21. Baltuttis, Dennik & Töppel, Jannick & Tränkler, Timm & Wiethe, Christian, 2020. "Managing the risks of energy efficiency insurances in a portfolio context: An actuarial diversification approach," International Review of Financial Analysis, Elsevier, vol. 68(C).
    22. Lin, Shih-Kuei & Chang, Chia-Chien & Powers, Michael R., 2009. "The valuation of contingent capital with catastrophe risks," Insurance: Mathematics and Economics, Elsevier, vol. 45(1), pages 65-73, August.
    23. Braun, Alexander, 2011. "Pricing catastrophe swaps: A contingent claims approach," Insurance: Mathematics and Economics, Elsevier, vol. 49(3), pages 520-536.
    24. Gatzert, Nadine & Kellner, Ralf, 2011. "The influence of non-linear dependencies on the basis risk of industry loss warranties," Insurance: Mathematics and Economics, Elsevier, vol. 49(1), pages 132-144, July.

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    More about this item

    Keywords

    Econophysics; Property insurance; Loss distribution; PCS index;
    All these keywords.

    JEL classification:

    • C46 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Specific Distributions
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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