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An Actuarial Approach for Modeling Pandemic Risk

Author

Listed:
  • Hainaut, Donatien

    (Université catholique de Louvain, LIDAM/ISBA, Belgium)

Abstract

This article proposes a model for pandemic risk and two stochastic extensions. It 1 is designed for actuarial valuation of insurance plans providing healthcare and death benefits. 2 The core of our approach relies on a deterministic model that is an efficient alternative to the 3 susceptible-Infected-Recovered (SIR) method. This model explains the evolution of the first waves 4 of COVID-19 in Belgium, Germany, Italy and Spain. Furthermore, it is analytically tractable for fair 5 pure premium calculation. In a first extension, we replace the time by a gamma stochastic clock. 6 This approach randomizes the timing of the epidemic peak. A second extension consists in adding a 7 Brownian noise and a jump process to explain the erratic evolution of the population of confirmed 8 cases. The jump component allows for local resurgences of the epidemic.

Suggested Citation

  • Hainaut, Donatien, 2021. "An Actuarial Approach for Modeling Pandemic Risk," LIDAM Reprints ISBA 2021002, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    • Handle: RePEc:aiz:louvar:2021002
    DOI: https://doi.org/10.3390/risks9010003
    Note: In: Risks - Vol. 9, no.1 (2021)
    as

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