Discrete-Time Risk Models with Claim Correlated Premiums in a Markovian Environment
Dhiti Osatakul, Xueyuan Wu
Risks | MDPI | Published : 2021
In this paper we consider a discrete-time risk model, which allows the premium to be adjusted according to claims experience. This model is inspired by the well-known bonus-malus system in the non-life insurance industry. Two strategies of adjusting periodic premiums are considered: aggregate claims or claim frequency. Recursive formulae are derived to compute the finite-time ruin probabilities, and Lundberg-type upper bounds are also derived to evaluate the ultimate-time ruin probabilities. In addition, we extend the risk model by considering an external Markovian environment in which the claims distributions are governed by an external Markov process so that the periodic premium adjustment..View full abstract
Dhiti Osatakul is supported by the Faculty of Business and Economics studentship by The University of Melbourne and the Chulalongkorn University Scholarship.