Paper: Oct 06,2024
q-fin.RM
ID:2410.04369
Deviance Voronoi Residuals for Space-Time Point Process Models: An Application to Earthquake Insurance Risk
Insurance risk arising from catastrophes such as earthquakes a component of
the Minimum Capital Test for federally regulated property and casualty
insurance companies. Analyzing earthquake insurance risk requires well-fitted
spatio-temporal point process models. Given the spatial heterogeneity of
earthquakes, the ability to assess whether the fits are adequate in certain
locations is crucial in obtaining usable models. Accordingly, we extend the use
of Voronoi residuals to calculate deviance Voronoi residuals. We also create a
simulation-based approach, in which losses and insurance claim payments are
calculated by relying on earthquake hazard maps of Canada. As an alternative to
the current guidelines of OSFI, a formula to calculate the country-wide minimum
capital test is proposed based on the correlation between the provinces.
Finally, an interactive web application is provided which allows the user to
simulate earthquake damage and the resulting financial losses and insurance
claims, at a chosen epicenter location.
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Paper Author: Roba Bairakdar,Debbie Dupuis,Melina Mailhot
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