Scribd
Upload
4 views2 pages

X5 Assignment

The document provides calculations related to insurance claims, including the mean and variance of amounts paid by a reinsurer and the moment generating function (MGF) of these amounts. It also discusses the expected payment by the insurer after applying excess loss reinsurance, leading to a final claim amount paid by the direct insurer. Additionally, it outlines the distribution of gross individual claim amounts and the insurer's payment structure based on claim thresholds.

Uploaded by

Bizaardo- the channel of everything
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
4 views2 pages

X5 Assignment

The document provides calculations related to insurance claims, including the mean and variance of amounts paid by a reinsurer and the moment generating function (MGF) of these amounts. It also discusses the expected payment by the insurer after applying excess loss reinsurance, leading to a final claim amount paid by the direct insurer. Additionally, it outlines the distribution of gross individual claim amounts and the insurer's payment structure based on claim thresholds.

Uploaded by

Bizaardo- the channel of everything
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

X5 Assignment

X5.1
(a) Mean amount paid by insurer (after reinsurance)
Let Y be the amount paid by the reinsurer (after reinsurance). Then Y = 0.85X and
E(Y) = 0.85E(X) = 0.85*2000 = 1,700
(b) Variance of the amount paid by the reinsurer
Let Z be the amount paid by the reinsurer. Then Z = 0.15X and :
Var(Z) = 0.15^2*(Var(X)) =( 0.15^2)*100^2 = 225
(c)MGF of amount paid by the insurer (after reinsurance) :
We have:
My(t) = E(e^ty) = E(e^t*0.85X) = Mx(0.85t)
We know that X follows a Gamma distribution. We can calculate the parameters of this
distribution from the mean and variance:
E(X) = a/l = 2000
Var(X) = a/l^2 = 100^2
Putting the first equation in the second one we get;
2000/l = 10000
l = 2000/10000 = 0.2
Therefore a = 2000*0.2 = 400
From page 12 of the tables we have the MGF of X is :
Mx(t) = (1- t/0.2)^(-400) = (1-5t)^(-400) , t < 0.2
Hence:
My(t) = Mx(0.85t) = (1-0.85t/0.2)^(-400) = (1-4.25t)^(-400), t < 1/4.25
X5.2
Let X represent the original claim amount in thousands. Then X ~ Par(3,20). Let Y be the
insurer payment net of the excess of loss reinsurance (in thousands):
Y = X if X<= 80
And Y = 80 if X>80
We have :
E(Y) = int(0,80) P(X > x) dx
Int(0,80) (20/20+x)^3 dx
20^3 Int(0,80) (1/20+x)^3 dx
= 20^3 Int(0,80) (20+x)^(-3)
= 20^3*Int(0,80) (-1/2)(1/20+x)^2
= 8000*[(-1/2)*(1/20+x)^2] integrating over the range of 0 to 80
= 8000*(3/2500) = 9.6
Now we define W = 0.75Y , so that W is the amount of a single claim paid by the direct
insurer, it follows that :
E(W) = 0.75*E(Y) = 0.75*9.6 = 7.2
Hence the claim amount paid by the direct insurer is 7,200
X5.3
If X is the gross individual claim amount random variable , then X ~ Exp(0.01) and the
amount paid by the insurer on the claim is :
Y = X if X<200
And Y = 200 if X>= 200

You might also like