TY - JOUR
T1 - Ruin Probabilities And Capital Requirement for Open Automobile Portfolios With a Bonus-Malus System Based on Claim Counts
AU - Afonso, Lourdes B.
AU - Cardoso, Rui M. R.
AU - Egídio dos Reis, Alfredo D.
AU - Guerreiro, Gracinda R.
PY - 2020/6/1
Y1 - 2020/6/1
N2 - For a large motor insurance portfolio, on an open environment, we study the impact of experience rating in finite and continuous time ruin probabilities. We consider a model for calculating ruin probabilities applicable to large portfolios with a Markovian Bonus-Malus System (BMS), based on claim counts, for an automobile portfolio using the classical risk framework model. New challenges are brought when an open portfolio scenario is introduced. When compared with a classical BMS approach ruin probabilities may change significantly. By using a BMS of a Portuguese insurer, we illustrate and discuss the impact of the proposed formulation on the initial surplus required to target a given ruin probability. Under an open portfolio setup, we show that we may have a significant impact on capital requirements when compared with the classical BMS, by having a significant reduction on the initial surplus needed to maintain a fixed level of the ruin probability.
AB - For a large motor insurance portfolio, on an open environment, we study the impact of experience rating in finite and continuous time ruin probabilities. We consider a model for calculating ruin probabilities applicable to large portfolios with a Markovian Bonus-Malus System (BMS), based on claim counts, for an automobile portfolio using the classical risk framework model. New challenges are brought when an open portfolio scenario is introduced. When compared with a classical BMS approach ruin probabilities may change significantly. By using a BMS of a Portuguese insurer, we illustrate and discuss the impact of the proposed formulation on the initial surplus required to target a given ruin probability. Under an open portfolio setup, we show that we may have a significant impact on capital requirements when compared with the classical BMS, by having a significant reduction on the initial surplus needed to maintain a fixed level of the ruin probability.
UR - http://www.scopus.com/inward/record.url?scp=85084931054&partnerID=8YFLogxK
U2 - 10.1111/jori.12300
DO - 10.1111/jori.12300
M3 - Article
AN - SCOPUS:85084931054
VL - 87
SP - 501
EP - 522
JO - The Journal of Risk and Insurance
JF - The Journal of Risk and Insurance
SN - 1539-6975
IS - 2
ER -