An Actuarial Model of Excess of Policy Limits Losses

By Neil M. Bodoff

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Abstract

Excess of policy limits (XPL) losses is a phenomenon that pre­sents challenges for the practicing actuary. This paper proposes using a classic actuarial framework of frequency and severity, modified to address the unique challenge of XPL. The result is an integrated model of XPL losses together with non­XPL losses. A modification of the classic actuarial framework can provide a suitable basis for the modeling of XPL losses and for the pricing of the XPL loss component of reinsurance contracts.

Keywords Excess of policy limits, XPL, ERM, modeling

Citation

Bodoff, Neil M., "An Actuarial Model of Excess of Policy Limits Losses," Variance 11:1, 2018, pp. 133-141.

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Mission Statement

Variance (ISSN 1940-6452) is a peer-reviewed journal published by the Casualty Actuarial Society to disseminate work of interest to casualty actuaries worldwide. The focus of Variance is original practical and theoretical research in casualty actuarial science. Significant survey or similar articles are also considered for publication. Membership in the Casualty Actuarial Society is not a prerequisite for submitting papers to the journal and submissions by non-CAS members is encouraged.