Abstract
We present some new evidence on the tail distribution of commercial property losses based on a recently constructed dataset on large commercial risks. The dataset is based on contributions from Lloyd’s of London syndicates, and provides information on over three thousand claims occurred during the period 2000–2012, including detailed information on exposures. We use occupancy characteristics to compare the tail risk profiles of different commercial property exposures, and find evidence of substantial heterogeneity in tail behavior. The results demonstrate the benefits of aggregating granular information on both claims and exposures from different data sources, and provide warning against the use of reserving and capital modeling approaches that are not robust to heavy tails.
Highlights
A Service of zbwProvided in Cooperation with: MDPI – Multidisciplinary Digital Publishing Institute, Basel
Property and business interruption risks represent roughly a third,1 or USD 175 billion, of direct insurance premiums written in commercial insurance lines worldwide
We use a simple yet effective method to estimate the tail index, which relies on the log-log rank-size (LLRS) OLS regression
Summary
Provided in Cooperation with: MDPI – Multidisciplinary Digital Publishing Institute, Basel. Suggested Citation: Biffis, Enrico; Chavez, Erik (2014) : Tail risk in commercial property insurance, Risks, ISSN 2227-9091, MDPI, Basel, Vol 2, Iss. 4, pp. Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen. Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. Received: 6 April 2014; in revised form: 26 July 2014 / Accepted: 30 July 2014 /
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
