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On Stop-Loss Premiums for the Individual Model

Published online by Cambridge University Press:  29 August 2014

R. Kaas ,
A. E. van Heerwaarden  and
M. J. Goovaerts
R. Kaas*
Affiliation:
University of Amsterdam
A. E. van Heerwaarden*
Affiliation:
University of Amsterdam
M. J. Goovaerts*
Affiliation:
K.U. Leuven andUniversity of Amsterdam
*
Institute for Actuarial Scienceand Econometrics, Jodenbreestraat 23, NL-1011 NH, Amsterdam.
Institute for Actuarial Scienceand Econometrics, Jodenbreestraat 23, NL-1011 NH, Amsterdam.
Institute for Actuarial Scienceand Econometrics, Jodenbreestraat 23, NL-1011 NH, Amsterdam.
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Abstract

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It is shown how the upper bounds for stop-loss premiums (and approximations to tail probabilities) obtained by replacing the individual model for a portfolio of risks by the collective model can be improved upon at the cost of only slightly more computer time. The method used is simply to keep a restricted number of large risks as they are instead of approximating them by a compound Poisson distribution. In a real-life example, the relative error in the stop-loss premium is shown to be reduced drastically by keeping only 10 out of 743 risks unchanged.

Keywords

Stop-loss premiumindividual model
Type
Workshop
Information
ASTIN Bulletin: The Journal of the IAA , Volume 18 , Issue 1 , April 1988 , pp. 91 - 97
Copyright
Copyright © International Actuarial Association 1988

References

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