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Examining the Effects of Gradual Catastrophes on Capital Modelling and the Solvency of Insurers: The Case of COVID-19

Author

Listed:
  • Muhsin Tamturk

    (Department of Mathematics, University of Leicester, Leicester LE1 7RH, UK)

  • Dominic Cortis

    (Department of Insurance, FEMA, University of Malta, MSD2080 Msida, Malta)

  • Mark Farrell

    (Queen’s Management School, Queen’s University Belfast, Belfast BT9 5EE, UK)

Abstract

This paper models the gradual elements of catastrophic events on non-life insurance capital with a particular focus on the impact of pandemics, such as COVID-19. A combination of actuarial and epidemiological models are handled by the Markovian probabilistic approach, with Feynman’s path calculation and Dirac notations, in order to observe how a pandemic risk may affect an insurer via reduced business. We also examine how the effects of a pandemic can be taken into account both during and at the end of the process. Examples are also provided showing the potential effects of a pandemic on different types of insurance product.

Suggested Citation

  • Muhsin Tamturk & Dominic Cortis & Mark Farrell, 2020. "Examining the Effects of Gradual Catastrophes on Capital Modelling and the Solvency of Insurers: The Case of COVID-19," Risks, MDPI, vol. 8(4), pages 1-13, December.
    • Handle: RePEc:gam:jrisks:v:8:y:2020:i:4:p:132-:d:457701
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    References listed on IDEAS

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    12. Muhsin Tamturk & Sergey Utev, 2019. "Optimal Reinsurance via Dirac-Feynman Approach," Methodology and Computing in Applied Probability, Springer, vol. 21(2), pages 647-659, June.
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    Cited by:

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