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Regime-Switching Periodic Models For Claim Counts

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  • Yi Lu
  • José Garrido

Abstract

We study a Cox risk model that accounts for both seasonal variations and random fluctuations in the claims intensity. This occurs with natural phenomena that evolve in a seasonal environment and affect insurance claims, such as hurricanes.More precisely, we define an intensity process governed by a periodic function with a random peak level. The periodic intensity function follows a deterministic pattern in each short-term period and is illustrated by a beta-type function. A Markov chain with m states, corresponding to different risk levels, is chosen for the level process, yielding a so-called regime-switching process.The properties of the corresponding claim-counting process are discussed in detail. By properly defining a Lundberg-type coefficient, we derive upper bounds for finite time ruin probabilities in a two-state case.

Suggested Citation

  • Yi Lu & José Garrido, 2006. "Regime-Switching Periodic Models For Claim Counts," North American Actuarial Journal, Taylor & Francis Journals, vol. 10(4), pages 235-248.
    • Handle: RePEc:taf:uaajxx:v:10:y:2006:i:4:p:235-248
    DOI: 10.1080/10920277.2006.10597424
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