Charging for Diversifiable Risk and Proud to Do It: Multiline Insurance Pricing with a Distortion Risk Measure
John Major and Stephen Mildenhall, CAS Webinar, September 24, 2020.
- Types of risk
- Market charges for idiosyncratic risk
- Winner’s curse
- Ambiguity aversion
- Tranching capital
- Fungible capital
- Distortion functions
- Scenario-loss domain
- Expected losses with limited liability
- Equal priority
- Expected loss by line with equal priority
- Natural allocation
- Frictional costs of capital
- Two-line example
- Understanding conditional losses by line
- Why negative margins?
- Market structure implications
- Four market actors
- How risks pool
- Why is Florida homeowners written in monoline companies?