RUIN PROBABILITIES IN DEPENDENT INSURANCES WITH AUTOREGRESSIVE MODEL

Yıl 2018, Cilt: 7 Sayı: 4, 365 - 375, 30.12.2018

Elif Makbule Cekici Sami Ozcan Hasan Durmus

https://doi.org/10.17261/Pressacademia.2018.997

Öz

Purpose- Risk analysis and ruin probabilities were calculated with the assumption of independence in the past, however this assumption

does not reflect the reality at the present time. Today, insurance activities are more advanced, and consumers are more informed, for this

reason existence of dependency between insurance branches within the portfolio of an insurance firm, is unavoidable. Aim of this study is

to calculate the ruin probability for two dependent insurance branches.

Methodology- In this study, monthly claim data of a leading insurance firm which belongs to two different insurance branches namely

traffic and health, in the period of 2007-2016 are used.

Findings- In the case of fixed interest rate and initial capital, it’s found that if dependence of insurance branches decreases, ruin

probabilities decrease.

Conclusion- In the case of fixed interest rate and initial capital, to decrease the ruin probability, dependence of branches should be

decreased. To lower the dependence, collected premiums should be increased, thus lower adjustment coefficients can be obtained.

Accordingly, with the lower adjustment coefficient, ruin probabilities can be decreased.

Anahtar Kelimeler

Ruin probability, dependent ruin probability, multivariate autoregressive process (MAR(1)), 2-parameter exponential distribution

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