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Double Risk Catastrophe Reinsurance Premium Based on Houses Damaged and Deaths

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  • Hilda Azkiyah Surya

    (Master of Mathematics Study Program, Department of Mathematics, Faculty of Mathematics and Natural Sciences, Universitas Padjadjaran, Sumedang 45363, Indonesia)

  • Herlina Napitupulu

    (Department of Mathematics, Faculty of Mathematics and Natural Sciences, Universitas Padjadjaran, Sumedang 45363, Indonesia)

  • Sukono

    (Department of Mathematics, Faculty of Mathematics and Natural Sciences, Universitas Padjadjaran, Sumedang 45363, Indonesia)

Abstract

The peaks over threshold (POT) model for catastrophe (CAT) reinsurance pricing has been widely used, but has mainly focused on univariate CAT reinsurance pricing. We provide further justification and support for the model by considering the addition of more than one type of CAT risk in the context of extreme value theory. We further extend the applicability of the CAT reinsurance premium model by considering house damage and deaths as CAT risk. Using the proposed model, we present a simulation framework for pricing double risk CAT reinsurance, based on excess-of-loss reinsurance contract. Furthermore, we fit the POT model to the earthquake loss data in Indonesia. Finally, we provide the price of the double risk CAT reinsurance premium under the standard deviation premium principle. The framework results obtained show that the pricing formulas in this study are appropriate for the double risk claim and may be used as a basis for the pricing of double risk CAT excess-of-loss reinsurance contracts.

Suggested Citation

  • Hilda Azkiyah Surya & Herlina Napitupulu & Sukono, 2023. "Double Risk Catastrophe Reinsurance Premium Based on Houses Damaged and Deaths," Mathematics, MDPI, vol. 11(4), pages 1-18, February.
    • Handle: RePEc:gam:jmathe:v:11:y:2023:i:4:p:810-:d:1058523
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    References listed on IDEAS

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    4. Wen Chao & Polinpapilinho Katina, 2021. "Valuing Multirisk Catastrophe Reinsurance Based on the Cox–Ingersoll–Ross (CIR) Model," Discrete Dynamics in Nature and Society, Hindawi, vol. 2021, pages 1-8, February.
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