Grant: Discovery Grants Program - Individual

<p>An insurer is liable for the claims generated by the contracts sold to clients even if payments occur after the end of the contract and all premiums have been received. He must <strong>predict the total amount</strong> necessary to pay claims that he has legally committed to cover for and to avoid insolvency or a loss of market share. To carry out this task effectively, a <strong>model for the development of claims costs</strong> is essential. In contrast to traditional approaches, which focus on describing the <strong>collective</strong> dynamics of the portfolio, <strong>individual</strong> methods capture the specific dynamics of each claim (or each small group of claims) in order to predict with maximum accuracy, their future development.</p> <p> <span style=""line-height: 1.5em;"">The proposed research program aims at <strong>developing</strong> and <strong>analyzing new</strong></span><span style=""line-height: 1.5em;""> </span><span style=""line-height: 1.5em;""><strong>insurance models involving individual dynamics</strong> and to </span><strong style=""line-height: 1.5em;"">classify risks from micro- and macro-approaches</strong><span style=""line-height: 1.5em;"">. The first part is devoted to <strong>investigate the ""completion risk""</strong>, i.e., the risk caused by the fact that the insurer must complete the missing part of the development of an open claim on insurer's activities under various individual models, <strong>to quantify the impact of various assumptions about individual dynamics on the level of risk</strong> and <strong>to study the impact of exogenous factors on this risk</strong> and <strong>how to control it </strong>in the portfolio of an insurance company.</span><span style=""line-height: 1.5em;""> The second part is dedicated to <strong>comparison,</strong> </span><span style=""line-height: 1.5em;""><strong>classification </strong>and<strong> integration</strong> of risks from both, individual and collective approaches.</span></p> <p>From a theoretical perspective, there is only a small set of academic literature on individual models. Solving problems presented in this proposal will yield innovative approaches by developing a new class of models. This<span style=""line-height: 1.5em;""> will contribute to the advancement of knowledge in </span><strong style=""line-height: 1.5em;"">loss reserving</strong><span style=""line-height: 1.5em;"">, </span><strong style=""line-height: 1.5em;"">ratemaking</strong><span style=""line-height: 1.5em;""> and </span><strong style=""line-height: 1.5em;"">reinsurance</strong><span style=""line-height: 1.5em;"">. I believe that the proposed research program has the potential of shifting the focus in the literature from collective models, which are extensively used in risk models, to individual models and thereby </span>increase the precision of the predictions. <span style=""line-height: 1.5em;"">From a practical perspective, the results of the proposed research program will enable a more accurate </span><strong style=""line-height: 1.5em;"">evaluation of the impact of insurers' decisions</strong><span style=""line-height: 1.5em;""> on the overall risk level and will lead to a </span><strong style=""line-height: 1.5em;"">greater financial stability</strong><span style=""line-height: 1.5em;""> for an insurance company.</span></p>