A METHOD FOR CALCULATING THE PROBABILITY OF RUIN OF AN INSURANCE COMPANY
Journal
ROMAI Journal
Date Issued
2019-01-01
Author(s)
Janeska Sarkanjac, Smilka
Miteski, Andreja
Miteski, Stefan
Abstract
Insurance companies frequently ask their actuaries to do calculations of the
probability of the company being ruined. These calculations are based on
complex data analysis of the last insurance period, which requires building
mathematical models and using the data as an input parameter in these models.
For this purpose, an algorithm, which presents a simplified mathematical model
and provides approximate results of the outcomes (later used for managerial
decisions), was prepared. Modeling of different outcomes based on various
different inputs shows that the probability of the company to become ruined
is inversely proportional to the written premium.
The algorithm developed in this paper is illustrated with tables. The model
is presented to the reader in a way that the reader can reproduce the calculations and build a custom data model.
probability of the company being ruined. These calculations are based on
complex data analysis of the last insurance period, which requires building
mathematical models and using the data as an input parameter in these models.
For this purpose, an algorithm, which presents a simplified mathematical model
and provides approximate results of the outcomes (later used for managerial
decisions), was prepared. Modeling of different outcomes based on various
different inputs shows that the probability of the company to become ruined
is inversely proportional to the written premium.
The algorithm developed in this paper is illustrated with tables. The model
is presented to the reader in a way that the reader can reproduce the calculations and build a custom data model.
Subjects
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