NDLI: Focussed selection of the claim severity distribution

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Focussed selection of the claim severity distribution

Content Provider	Scilit
Author	Wang, Yinzhi Haff, Ingrid Hobæk
Copyright Year	2018
Description	Journal: Scandinavian Actuarial Journal Risk assessment is a core theme within non-life insurance and estimation of quantiles far out in the upper tail is therefore one of the main applications of the total loss distribution of a non-life insurance portfolio. The choice of claim severity distribution should therefore reflect this. Therefore, we have explored how the focussed information criterion, FIC, aimed at finding the best model for estimating a given parameter of interest, the focus parameter, works as a tool for selecting the claim size distribution. As a quantile cannot be used directly as a focus parameter, we have tried different proxy focus parameters. To see how the FIC performs in this setting, compared to the other commonly used model selection methods AIC and BIC, we have performed a simulation study. In particular, we wanted to investigate the effect of the heaviness of the tail of the claim size distribution and the amount of available data. The performance of the different model selection methods was then evaluated based on the quality of the resulting estimates of the quantiles. Our study shows the best of the focussed criteria is the FIC $ϵ, based on one single quantile from the claim severity distribution. Further, the performance of the FICϵ is mostly either comparable to or considerably better than that of the BIC, which is the best performing of the state of the art approaches. In particular, the FICϵ works well when the data are heavy-tailed, when the sample size is rather low and when the parameter of interest is the quantile far out in the tail of the total loss distribution.$
Related Links	https://www.duo.uio.no/bitstream/10852/70811/2/claimsize_FIC.pdf
Ending Page	142
Page Count	14
Starting Page	129
ISSN	03461238
e-ISSN	16512030
DOI	10.1080/03461238.2018.1519847
Journal	Scandinavian Actuarial Journal
Issue Number	2
Volume Number	2019
Language	English
Publisher	Informa UK Limited
Publisher Date	2019-02-07
Access Restriction	Open
Subject Keyword	Journal: Scandinavian Actuarial Journal Hardware and Architecturee Loss Distributions Model Selection Risk Measures
Content Type	Text
Subject	Statistics and Probability Economics and Econometrics Statistics, Probability and Uncertainty

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