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Measuring Systemic Governmental Reinsurance Risks of Extreme Risk Events

Author

Listed:
  • Elroi Hadad

    (Department of Industrial Engineering and Management, Sami Shamoon College of Engineering, 56 Bialik St., Beer Sheva 8410802, Israel)

  • Tomer Shushi

    (Department of Business Administration, Guilford Glazer Faculty of Business and Management, Ben-Gurion University of the Negev, Beer-Sheva 8410501, Israel)

  • Rami Yosef

    (Department of Business Administration, Guilford Glazer Faculty of Business and Management, Ben-Gurion University of the Negev, Beer-Sheva 8410501, Israel)

Abstract

This study presents an easy-to-handle approach to measuring the severity of reinsurance that faces a system of dependent claims, where the reinsurance contracts are of excess loss or proportional loss. The proposed approach is a natural generalization of common reinsurance methodologies providing a conservative framework that deals with the fundamental question of how much money should a government hold to prepare for natural or human-made extreme risk events that the government will cover? Although the ruin theory is commonly used for extreme risk events, we suggest a new risk measure to deal with such events in a new framework based on multivariate risk measures. We analyze the results for the log-elliptical model of dependent claims, which are commonly used in risk analysis, and illustrate our novel risk measure using a Monte Carlo simulation.

Suggested Citation

  • Elroi Hadad & Tomer Shushi & Rami Yosef, 2023. "Measuring Systemic Governmental Reinsurance Risks of Extreme Risk Events," Risks, MDPI, vol. 11(3), pages 1-11, February.
    • Handle: RePEc:gam:jrisks:v:11:y:2023:i:3:p:50-:d:1078566
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    References listed on IDEAS

    as
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