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Analysing the impact of dependency on conditional survival functions using copulas

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  • Safari-Katesari Hadi

    (School of Mathematical and Statistical Sciences, Southern Illinois University, Carbondale, IL, 62901-4408, United States .)

  • Zaroudi Samira

    (School of Mathematical and Statistical Sciences, Southern Illinois University, Carbondale, IL, 62901-4408, United States)

Abstract

Nowadays, insurance contract reserves for coupled lives are considered jointly, which has a significant influence on the process of determining actuarial reserves. In this paper, conditional survival distributions of life insurance reserves are computed using copulas. Subsequently, the results are compared with an independence case. These calculations are based on selected Archimedean copulas and apply when the ‘death of one individual’ condition exists. The estimation outcome indicates that the insurer reserves calculated by means of Archimedean copulas are far more effective than those resulting from an independence assumption. The study demonstrates that copula-based dependency modelling improves the calculations of reserves made for actuarial purposes.

Suggested Citation

  • Safari-Katesari Hadi & Zaroudi Samira, 2021. "Analysing the impact of dependency on conditional survival functions using copulas," Statistics in Transition New Series, Polish Statistical Association, vol. 22(1), pages 217-226, March.
    • Handle: RePEc:vrs:stintr:v:22:y:2021:i:1:p:217-226:n:11
    DOI: 10.21307/stattrans-2021-013
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    References listed on IDEAS

    as
    1. Spreeuw, Jaap & Owadally, Iqbal, 2013. "Investigating the Broken-Heart Effect: a Model for Short-Term Dependence between the Remaining Lifetimes of Joint Lives," Annals of Actuarial Science, Cambridge University Press, vol. 7(2), pages 236-257, September.
    2. Klugman, Stuart A. & Parsa, Rahul, 1999. "Fitting bivariate loss distributions with copulas," Insurance: Mathematics and Economics, Elsevier, vol. 24(1-2), pages 139-148, March.
    3. Edward Frees & Emiliano Valdez, 1998. "Understanding Relationships Using Copulas," North American Actuarial Journal, Taylor & Francis Journals, vol. 2(1), pages 1-25.
    4. Min Ji & Mary Hardy & Johnny Siu-Hang Li, 2011. "Markovian Approaches to Joint-Life Mortality," North American Actuarial Journal, Taylor & Francis Journals, vol. 15(3), pages 357-376.
    5. Hadi Safari-Katesari & Samira Zaroudi, 2020. "Count copula regression model using generalized beta distribution of the second kind," Statistics in Transition New Series, Polish Statistical Association, vol. 21(2), pages 1-12, June.
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