IDEAS home Printed from https://ideas.repec.org/a/bpj/apjrin/v4y2010i2n3.html
   My bibliography  Save this article

On Modeling Diversification Benefits in Insurance Portfolios--An Australian Perspective

Author

Listed:
  • Li Jackie

    (Nanyang Technological University, Singapore)

Abstract

Empirical measurement of dependency between different lines of non-life insurance business remains an open problem. International regulatory requirements and accounting standards are moving towards increased disclosure of the variability of insurance liabilities. In estimating the variability, it is required to take diversification benefits into account, as it is generally believed that different lines of business are not perfectly dependent on one another. Due to data limitations and the complicated nature of non-life insurance business, however, direct quantification of dependency and so diversification benefits between individual lines is a difficult task. In this article, we set forth some practical considerations in modeling dependency and diversification benefits under Australian regulatory environment. We start with providing a summary of the underlying factors causing dependency and examining the reasonableness of some industry correlation figures based on these factors. We also study the correlations between the historical loss ratios of several lines of Australian business. Afterward we carry out extensive simulation studies to investigate the effects of applying some recently suggested methodologies for tackling the problem of evaluating diversification benefits.

Suggested Citation

  • Li Jackie, 2010. "On Modeling Diversification Benefits in Insurance Portfolios--An Australian Perspective," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 4(2), pages 1-45, July.
  • Handle: RePEc:bpj:apjrin:v:4:y:2010:i:2:n:3
    as

    Download full text from publisher

    File URL: https://www.degruyter.com/view/j/apjri.2010.4.2/apjri.2010.4.2.1073/apjri.2010.4.2.1073.xml?format=INT
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:apjrin:v:4:y:2010:i:2:n:3. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla). General contact details of provider: https://www.degruyter.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.