Decomposing catastrophic risk

✍ Scribed by Harris Schlesinger

• Book ID: 104300009
• Publisher: Elsevier Science
• Year: 1999
• Tongue: English
• Weight: 72 KB
• Volume: 24
• Category: Article
• ISSN: 0167-6687
• DOI: 10.1016/s0167-6687(98)00041-9

✦ Synopsis

It is examined how losses can be decomposed into two multiplicative components, one independent among insureds and the other highly correlated. This is done for both the severity of loss, and for the probability of a loss. As opposed to a common principle for the insurability of a loss, it is shown how a high degree of correlation in the nondiversifiable loss component actually may be beneficial in facilitating alternative risk financing.