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  3. Insurance Risk Models II

Insurance Risk Models II (ACTL90014)

Graduate courseworkPoints: 12.5Not available in 2024

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Overview

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Topics considered in this subject include premium principles, including variance principle, Esscher principle, risk adjusted principle; applications of utility theory, premium calculation and optimal reinsurance retention levels; reinsurance problems; ruin theory, Lundberg's inequality, explicit solutions for the probability of ultimate ruin, application of Panjer's recursion formula, the probability and severity of ruin, the effect of reinsurance on ruin probabilities.

Intended learning outcomes

On successful completion of this subject, students should be able to:



  • Apply relevant pre-requisite knowledge of mathematics, probability theory and statistics in the solution of a range of practical problems;
  • Describe the basic concepts of utility theory and apply them to insurance problems;
  • Explain the concepts of a premium calculation principle and show whether a premium calculation principle satisfies certain properties;
  • Derive Lundberg's inequality;
  • Describe the effect of simple reinsurance arrangements on ruin probabilities;
  • Derive explicit solutions for the ruin probability in the classical risk model;
  • Calculate approximations to ruin probabilities, explaining the rationale behind each approach.

Generic skills

On successful completion of this subject students should have enhanced their skills in:

  • High level of development: written communication; problem solving; statistical reasoning; application of theory to practice; interpretation and analysis.

Last updated: 30 January 2024