Application of a Vine Copula for Multi-Line Insurance Reserving
This article introduces a novel use of the vine copula which captures dependence among multi-line claim triangles, especially when an insurance portfolio consists of more than two lines of business. First, we suggest a way to choose an optimal joint loss development model for multiple lines of busin...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2020-10-01
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| Series: | Risks |
| Subjects: | |
| Online Access: | https://www.mdpi.com/2227-9091/8/4/111 |
| _version_ | 1797550266531184640 |
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| author | Himchan Jeong Dipak Dey |
| author_facet | Himchan Jeong Dipak Dey |
| author_sort | Himchan Jeong |
| collection | DOAJ |
| description | This article introduces a novel use of the vine copula which captures dependence among multi-line claim triangles, especially when an insurance portfolio consists of more than two lines of business. First, we suggest a way to choose an optimal joint loss development model for multiple lines of business that considers marginal distribution, vine copula structure, and choice of family for each pair of copulas. The performance of the model is also demonstrated with Bayesian model diagnostics and out-of-sample validation measures. Finally, we provide an implication of the dependence modeling, which allows a company to analyze and establish the risk capital for whole portfolio. |
| first_indexed | 2024-03-10T15:26:52Z |
| format | Article |
| id | doaj.art-bce9c57b09f2431dac235ffc2ea0e6e6 |
| institution | Directory Open Access Journal |
| issn | 2227-9091 |
| language | English |
| last_indexed | 2024-03-10T15:26:52Z |
| publishDate | 2020-10-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Risks |
| spelling | doaj.art-bce9c57b09f2431dac235ffc2ea0e6e62023-11-20T18:01:06ZengMDPI AGRisks2227-90912020-10-018411110.3390/risks8040111Application of a Vine Copula for Multi-Line Insurance ReservingHimchan Jeong0Dipak Dey1Department of Statistics and Actuarial Science, Simon Fraser University, 8888 University Drive, Burnaby, BC V5A 1S6, CanadaDepartment of Statistics, University of Connecticut, 215 Glenbrook Rd. U-4120, Storrs, CT 06269-4120, USAThis article introduces a novel use of the vine copula which captures dependence among multi-line claim triangles, especially when an insurance portfolio consists of more than two lines of business. First, we suggest a way to choose an optimal joint loss development model for multiple lines of business that considers marginal distribution, vine copula structure, and choice of family for each pair of copulas. The performance of the model is also demonstrated with Bayesian model diagnostics and out-of-sample validation measures. Finally, we provide an implication of the dependence modeling, which allows a company to analyze and establish the risk capital for whole portfolio.https://www.mdpi.com/2227-9091/8/4/111Bayesian inferencemodel selectionmulti-line reservingproperty and casualty insurancevine copula |
| spellingShingle | Himchan Jeong Dipak Dey Application of a Vine Copula for Multi-Line Insurance Reserving Risks Bayesian inference model selection multi-line reserving property and casualty insurance vine copula |
| title | Application of a Vine Copula for Multi-Line Insurance Reserving |
| title_full | Application of a Vine Copula for Multi-Line Insurance Reserving |
| title_fullStr | Application of a Vine Copula for Multi-Line Insurance Reserving |
| title_full_unstemmed | Application of a Vine Copula for Multi-Line Insurance Reserving |
| title_short | Application of a Vine Copula for Multi-Line Insurance Reserving |
| title_sort | application of a vine copula for multi line insurance reserving |
| topic | Bayesian inference model selection multi-line reserving property and casualty insurance vine copula |
| url | https://www.mdpi.com/2227-9091/8/4/111 |
| work_keys_str_mv | AT himchanjeong applicationofavinecopulaformultilineinsurancereserving AT dipakdey applicationofavinecopulaformultilineinsurancereserving |