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On Stop-Loss Premiums for the Individual Model

Author

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  • Kaas, R.
  • van Heerwaarden, A. E.
  • Goovaerts, M. J.

Abstract

It is shown how the upper bounds for stop-loss premiums (and approximations to tail probabilities) obtained by replacing the individual model for a portfolio of risks by the collective model can be improved upon at the cost of only slightly more computer time. The method used is simply to keep a restricted number of large risks as they are instead of approximating them by a compound Poisson distribution. In a real-life example, the relative error in the stop-loss premium is shown to be reduced drastically by keeping only 10 out of 743 risks unchanged.

Suggested Citation

  • Kaas, R. & van Heerwaarden, A. E. & Goovaerts, M. J., 1988. "On Stop-Loss Premiums for the Individual Model," ASTIN Bulletin, Cambridge University Press, vol. 18(1), pages 91-97, April.
    • Handle: RePEc:cup:astinb:v:18:y:1988:i:01:p:91-97_00
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    Cited by:

    1. Gerhold, Stefan & Gülüm, I. Cetin, 2019. "Peacocks nearby: Approximating sequences of measures," Stochastic Processes and their Applications, Elsevier, vol. 129(7), pages 2406-2436.

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