- Email: [email protected]
The insurance of catastrophe risks.
164
Abstracts and Reviews
3. events due to cold weather. This distinction is imperative due to heterogenous climatic conditions, heterogenous in frequency, heterogenous in claim size distributions notably with great variability and a very heavy upper tail for hurricanes. Based on this assumption, they proved that the yearly frequency of each type of event was appropriately modelized by a Poisson distribution. The tests they used to tit the observed amounts to classical distributions, on the basis of truncated or censored data, lead us to reject the Pareto distributions and to prefer the log-Normals. They compared the distributions by type, especially from the point of view of their respective concentrations. In the fourth chapter, the authors attempted to solve the problem of covering such risks for an American insurance company. Knowing its risk exposure, they calculate the direct premiums (pure and loaded premiums) it required assuming that: - for each type of claim, there was independence between frequency and claim values. - there was no dependence between the three types of (Authors) claims. Keywords: 053083
Natural
(M54,
Disasters,
Catastrophic
Risk.
M52)
The insurance of catastrophe risks. Schnieper R., SCOR Notes, 1993. A model is proposed which explains how the insurance industry - the insurance, reinsurance and retrocession markets - copes with catastrophe risks, i.e. how risks are shared among different risk carriers of different segments of the market, how premiums are determined, how the industry responds to the strain of unusually large catastrophe losses. The first section gives a broad definition of catastrophe risks. In the second section a model of an insurance company is presented. Based on management objectives (return on equity target, equity amount the company is willing to risk) the premium loading for the total portfolio is derived. This loading is computed according to the standard deviation principle. It is argued that the loading for the whole portfolio should be apportioned among uncorrelated subportfolios according to the variance principle. The risk aversion is derived from the management objectives. It is shown how prices affect the availability of capacity. In the third section different risk sharing agreements commonly used in practice to provide cover for
catastrophe risks are analyzed, and market price risks, which are uncorrelated with their existing portfolio, according to the variance principle. The optimal (i.e. price minimizing) proportional risk sharing agreement is described. Based on a distributional assumption commonly used in the context of catastrophe risks, the optimal retention of an excess of loss reinsurance is derived. The two types of reinsurance are compared. In the fourth section it is argued that all exposures from a given natural peril should be treated as one risk instead of being looked at on a company, portfolio or even policy basis. A simple model of the insurance and reinsurance market for catastrophe risks is proposed. Based on a parametric assumption, the optimal retention of each local insurance market and the price for the cover of each catastrophe risk is derived. It is shown that the availability of retrocession capacity has a great impact on the retention of both the insurance and reinsurance markets and leads to considerably lower prices. Within the framework of their model it is possible to determine explicitly the optimal retentions of different excess of loss reinsurance and retrocession covers. It is shown that the retrocession market is very vulnerable to unusually large catastrophe losses, and the consequences of a strong reduction of retrocession capacity are analyzed. (Author) Keywords:
Catastrophe
Risk,
Loading,
Risk
Sharing
Agreements. 053084 (M54,
E43)
Runaway reactions, their courses, and the methods to establish safe process conditions. Gustin J.L., Risk Analysis, Vol. 12, nr. 4, 1992, pp. 475-481.
The purpose of this paper is to describe the various process deviations which can cause a runaway reaction to occur, and to discuss the experimental information necessary for risk assessment, the choice of a safe process, and the mitigation of the consequences of the runaway reaction. Ten typical hazardous process situations have been identified, considering various modes of initiation, homogeneous and heterogeneous, Arrhenius, and autocatalytic reactions. Each possible hazardous process deviation is illustrated by examples from the process industry and/or relevant experimental information obtained from laboratory experiments. (Author) Keywords: Reactions,
Chemical Process Risk Assessment.
Safety,
Runaway
Abstracts and Reviews
3. events due to cold weather. This distinction is imperative due to heterogenous climatic conditions, heterogenous in frequency, heterogenous in claim size distributions notably with great variability and a very heavy upper tail for hurricanes. Based on this assumption, they proved that the yearly frequency of each type of event was appropriately modelized by a Poisson distribution. The tests they used to tit the observed amounts to classical distributions, on the basis of truncated or censored data, lead us to reject the Pareto distributions and to prefer the log-Normals. They compared the distributions by type, especially from the point of view of their respective concentrations. In the fourth chapter, the authors attempted to solve the problem of covering such risks for an American insurance company. Knowing its risk exposure, they calculate the direct premiums (pure and loaded premiums) it required assuming that: - for each type of claim, there was independence between frequency and claim values. - there was no dependence between the three types of (Authors) claims. Keywords: 053083
Natural
(M54,
Disasters,
Catastrophic
Risk.
M52)
The insurance of catastrophe risks. Schnieper R., SCOR Notes, 1993. A model is proposed which explains how the insurance industry - the insurance, reinsurance and retrocession markets - copes with catastrophe risks, i.e. how risks are shared among different risk carriers of different segments of the market, how premiums are determined, how the industry responds to the strain of unusually large catastrophe losses. The first section gives a broad definition of catastrophe risks. In the second section a model of an insurance company is presented. Based on management objectives (return on equity target, equity amount the company is willing to risk) the premium loading for the total portfolio is derived. This loading is computed according to the standard deviation principle. It is argued that the loading for the whole portfolio should be apportioned among uncorrelated subportfolios according to the variance principle. The risk aversion is derived from the management objectives. It is shown how prices affect the availability of capacity. In the third section different risk sharing agreements commonly used in practice to provide cover for
catastrophe risks are analyzed, and market price risks, which are uncorrelated with their existing portfolio, according to the variance principle. The optimal (i.e. price minimizing) proportional risk sharing agreement is described. Based on a distributional assumption commonly used in the context of catastrophe risks, the optimal retention of an excess of loss reinsurance is derived. The two types of reinsurance are compared. In the fourth section it is argued that all exposures from a given natural peril should be treated as one risk instead of being looked at on a company, portfolio or even policy basis. A simple model of the insurance and reinsurance market for catastrophe risks is proposed. Based on a parametric assumption, the optimal retention of each local insurance market and the price for the cover of each catastrophe risk is derived. It is shown that the availability of retrocession capacity has a great impact on the retention of both the insurance and reinsurance markets and leads to considerably lower prices. Within the framework of their model it is possible to determine explicitly the optimal retentions of different excess of loss reinsurance and retrocession covers. It is shown that the retrocession market is very vulnerable to unusually large catastrophe losses, and the consequences of a strong reduction of retrocession capacity are analyzed. (Author) Keywords:
Catastrophe
Risk,
Loading,
Risk
Sharing
Agreements. 053084 (M54,
E43)
Runaway reactions, their courses, and the methods to establish safe process conditions. Gustin J.L., Risk Analysis, Vol. 12, nr. 4, 1992, pp. 475-481.
The purpose of this paper is to describe the various process deviations which can cause a runaway reaction to occur, and to discuss the experimental information necessary for risk assessment, the choice of a safe process, and the mitigation of the consequences of the runaway reaction. Ten typical hazardous process situations have been identified, considering various modes of initiation, homogeneous and heterogeneous, Arrhenius, and autocatalytic reactions. Each possible hazardous process deviation is illustrated by examples from the process industry and/or relevant experimental information obtained from laboratory experiments. (Author) Keywords: Reactions,
Chemical Process Risk Assessment.
Safety,
Runaway