Jiménez-Huerta, Diego
(2009)
Stochastic models and methods for the assessment of earthquake risk in insurance.
PhD thesis, London School of Economics and Political Science.
Abstract
The problem of earthquake risk assessment and management in insurance is a
challenging one at the interface of geophysics, engineering seismology, stochastics,
insurance mathematics and economics. In this work, I propose stochastic
models and methods for the assessment of earthquake risk from an insurer's
point of view, where the aim is not to address problems in the financial mathematics
and economics of risk selection, pricing, portfolio management, and
risk transfer strategies such as reinsurance and securitisation, but to enable the
latter through the characterisation of the foundation of any risk management
consideration in insurance: the distribution of losses over a period of time for a
portfolio of risks.
Insurance losses are assumed to be generated by a loss process that is in turn
governed by an earthquake process, a point process marked with the earthquake's
hypocentre and magnitude, and a conditional loss distribution for an insurance
portfolio, governing the loss size given the hypocentre and magnitude of the
earthquake, and the physical characteristics of the portfolio as described in the
individual policy records.
From the modeling perspective, I examine the (non-trivial) minutiae around
the infrastructure underpinning the loss process. A novel model of the earthquake
process, a Poisson marked point process with spatial gamma intensity
measure on the hypocentral space, and extensions of the Poisson and stress
release models through the inclusion of hypocentral location in the mark, are
proposed. I discuss the general architectural considerations for constructing the
conditional loss distribution, and propose a new model as an alternative to the
traditional ground motion attenuation and seismic vulnerability approach in
engineering risk assessment. On the actuarial mathematics front, given a fully
specified loss process, I address the problem of constructing simulation based
and, where possible, analytical approximations to the distribution of portfolio
losses over a period of time.
I illustrate the applicability of the stochastic models and methods proposed
in this work through the analysis of a residential homeowners property catastrophe
portfolio exposed to earthquake risk in California. I construct approximations
to the distribution of portfolio losses over a period of time under each
of the three models of the earthquake process that I propose, and discuss their
relative merits.
Actions (login required)
 |
Record administration - authorised staff only |
Download statistics
Download statistics