Investigators from UQAM Target Actuarial Science (Modeling Dependence Between Loss Triangles With Hierarchical Archimedean Copulas)

By a News Reporter-Staff News Editor at Insurance Weekly News -- New research on Actuarial Science is the subject of a report. According to news reporting originating from Quebec City, Canada, by VerticalNews correspondents, research stated, "One of the most critical problems in property/casualty insurance is to determine an appropriate reserve for incurred but unpaid losses. These provisions generally comprise most of the liabilities of a non-life insurance company."

Our news editors obtained a quote from the research from UQAM, "The global provisions are often determined under an assumption of independence between the lines of business. Recently, Shi and Frees (2011) proposed to put dependence between lines of business with a copula that captures dependence between two cells of two different runoff triangles. In this paper, we propose to generalize this model in two steps. First, by using an idea proposed by Barnett and Zehnwirth (1998), we will suppose a dependence between all the observations that belong to the same calendar year (CY) for each line of business. Thereafter, we will then suppose another dependence structure that links the CYs of different lines of business. This model is done by using hierarchical Archimedean copulas. We show that the model provides more flexibility than existing models, and offers a better, more realistic and more intuitive interpretation of the dependence between the lines of business."

According to the news editors, the research concluded: "For illustration, the model is applied to a dataset from a major US property-casualty insurer, where a bootstrap method is proposed to estimate the distribution of the reserve."

For more information on this research see: Modeling Dependence Between Loss Triangles With Hierarchical Archimedean Copulas. Astin Bulletin, 2015;45(3):577-599. Astin Bulletin can be contacted at: Cambridge Univ Press, Edinburgh Bldg, Shaftesbury Rd, CB2 8RU Cambridge, England.

The news editors report that additional information may be obtained by contacting A. Abdallah, UQAM Montreal, Dept. of Math, Quebec City, PQ, Canada. Additional authors for this research include J.P. Boucher and H. Cossette.

Keywords for this news article include: Canada, Quebec City, Actuarial Science, North and Central America

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