Abstract
The two approaches to modelling aggregate claims—the individual and the collective models—have been regarded as arising by considering a portfolio of policies in different ways. The individual risk model (IRM) is derived by considering the claims on individual policies and summing over all policies in the portfolio, while the collective risk model (CRM) is derived from the portfolio as a whole. This is sometimes held to be the main difference between the IRM and the CRM. In fact the IRM can be derived in exactly the same way as the CRM and can be regarded as a compound binomial distribution. This makes a unified treatment of risk models possible, simplifies the calculation of the mean and variance of the IRM, and facilitates the calculation of higher moments.
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 callSimilar Papers
More From: Journal of the Institute of Actuaries
Disclaimer: 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.
