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A two-component copula with links to insurance

Author

Listed:
  • Ismail S.

    (Department of Statistics, 1 South Parks Road, Oxford OX1 3TG, UK)

  • Yu G.

    (Exposure Management Team, Lloyd’s of London, London, UK)

  • Reinert G.

    (Department of Statistics, 1 South Parks Road, Oxford OX1 3TG, UK)

  • Maynard T.

    (Exposure Management Team, Lloyd’s of London, London, UK)

Abstract

This paper presents a new copula to model dependencies between insurance entities, by considering how insurance entities are affected by both macro and micro factors. The model used to build the copula assumes that the insurance losses of two companies or lines of business are related through a random common loss factor which is then multiplied by an individual random company factor to get the total loss amounts. The new two-component copula is not Archimedean and it extends the toolkit of copulas for the insurance industry.

Suggested Citation

  • Ismail S. & Yu G. & Reinert G. & Maynard T., 2017. "A two-component copula with links to insurance," Dependence Modeling, De Gruyter, vol. 5(1), pages 295-303, December.
    • Handle: RePEc:vrs:demode:v:5:y:2017:i:1:p:295-303:n:17
    DOI: 10.1515/demo-2017-0017
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    References listed on IDEAS

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    1. Daniel Berg, 2009. "Copula goodness-of-fit testing: an overview and power comparison," The European Journal of Finance, Taylor & Francis Journals, vol. 15(7-8), pages 675-701.
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    Cited by:

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