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Exposure Modelling in Property Reinsurance

Author

Listed:
  • Jan Hrevuš
  • Luboš Marek

Abstract

Exposure curves play significant role in modelling of property per risk excess of loss non-proportional reinsurance contracts, especially in the situations when not enough historical data is available for applying experience-based methods or if the underlying exposure changed significantly. The paper deals only with the first loss scale (FLS) approach which is frequently used in Europe. An alternative approach is based on ISO´s PSOLD methodology which is typical for the U.S. The first research into FLS approach was done by Ruth E. Salzmann in 1963 and some further curves have been developed since that time, however, their availability is limited. According to the authors´ knowledge only limited number of articles were published on this topic and no comprehensive publication which would describe the methodology to a larger extent exists. The paper provides a comprehensive description of the FLS exposure rating methodology, aims to summarise both historical and latest developments in this area and also includes various authors´ own practical considerations. The theory is illustrated on numerical examples.

Suggested Citation

  • Jan Hrevuš & Luboš Marek, 2019. "Exposure Modelling in Property Reinsurance," Prague Economic Papers, Prague University of Economics and Business, vol. 2019(2), pages 129-154.
    • Handle: RePEc:prg:jnlpep:v:2019:y:2019:i:2:id:683:p:129-154
    DOI: 10.18267/j.pep.683
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    References listed on IDEAS

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    1. Bernegger, Stefan, 1997. "The Swiss Re Exposure Curves and the MBBEFD Distribution Class1," ASTIN Bulletin, Cambridge University Press, vol. 27(1), pages 99-111, May.
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    More about this item

    Keywords

    reinsurance; exposure; property; non-proportional; excess of loss;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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