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The Esscher Premium Principle: A Criticism. Comment

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  • Gerber, Hans U.

Abstract

Zehnwirth (1981) contains some flaws. Ifis the Esscher premium for a risk X, the loading is H(X) — E(X) and not h as Zehnwirth states. The first and third formulas on page 78 are wrong, since o(h) is a quantity such thatA correct statement would have been thator simply that H(X) is a continuous function of the parameter h. However, this continuity is not uniform in all risks, which is illustrated by (3). No matter how small h is, there is always an X such that the difference between H(X) and E(X) is substantial. In view of this what is the meaning of a statement like “… the Esscher premium is a small perturbation of the linearized credibility premium†?

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  • Gerber, Hans U., 1981. "The Esscher Premium Principle: A Criticism. Comment," ASTIN Bulletin, Cambridge University Press, vol. 12(2), pages 139-140, December.
    • Handle: RePEc:cup:astinb:v:12:y:1981:i:02:p:139-140_00
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    Cited by:

    1. Pan, Maolin & Wang, Rongming & Wu, Xianyi, 2008. "On the consistency of credibility premiums regarding Esscher principle," Insurance: Mathematics and Economics, Elsevier, vol. 42(1), pages 119-126, February.
    2. Cai, Jun & Wang, Ying, 2021. "Optimal capital allocation principles considering capital shortfall and surplus risks in a hierarchical corporate structure," Insurance: Mathematics and Economics, Elsevier, vol. 100(C), pages 329-349.
    3. Sordo, Miguel A. & Castaño-Martínez, Antonia & Pigueiras, Gema, 2016. "A family of premium principles based on mixtures of TVaRs," Insurance: Mathematics and Economics, Elsevier, vol. 70(C), pages 397-405.
    4. Urbina, Jilber & Guillén, Montserrat, 2013. "An application of capital allocation principles to operational risk," Working Papers 2072/222201, Universitat Rovira i Virgili, Department of Economics.
    5. Goovaerts, Marc J. & Kaas, Rob & Laeven, Roger J.A. & Tang, Qihe, 2004. "A comonotonic image of independence for additive risk measures," Insurance: Mathematics and Economics, Elsevier, vol. 35(3), pages 581-594, December.
    6. Goovaerts, Marc J. & Laeven, Roger J.A., 2008. "Actuarial risk measures for financial derivative pricing," Insurance: Mathematics and Economics, Elsevier, vol. 42(2), pages 540-547, April.

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