Dependence Modelling in Non-life Insurance Using the Bernstein Copula
Journal
Insurance: Mathematics and Economics
ISSN
0167-6687
ISSN-Digital
1873-5959
Type
journal article
Date Issued
2012-05
Author(s)
Abstract
This paper illustrates the modeling of dependence structures of non-life insurance risks using the Bernstein copula. We conduct a goodness-of-fit analysis and compare the Bernstein copula with other widely used copulas. Then, we illustrate the use of the Bernstein copula in a value-at-risk and tail-value-at-risk simulation study. For both analyses we utilize German claims data on storm, flood, and water damage insurance for calibration. Our results highlight the advantages of the Bernstein copula, including its flexibility in mapping inhomogeneous dependence structures and its easy use in a simulation context due to its representation as mixture of independent Beta densities. Practitioners and regulators working toward appropriate modeling of dependences in a risk management and solvency context can benefit from our results.
Language
English
Keywords
Non-life insurance
Copulas
Bernstein copula
Goodness-of-fit
Simulation
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Elsevier
Publisher place
Amsterdam
Volume
50
Number
3
Start page
430
End page
436
Pages
7
Subject(s)
Division(s)
Eprints ID
209570