Multidimensional balanced credibility model with time effect and two level random common effects

Abstract

This paper extends the multidimensional credibility model under balanced loss function to account for not only certain conditional dependence over time for claim amounts but also dependence across individual risks and over portfolio risks. By means of orthogonal projection method in Hilbert space of random vectors, the inhomogeneous and homogeneous multidimensional credibility estimators are derived, which generalize some well known existing results in credibility theory. Moreover, the unbiased estimators of structural parameters are investigated. Finally, we present a numerical example to show the existence of the multidimensional credibility estimators and their difference from the existing ones.