COMPUTATION OF REINSURANCE PREMIUMS BY INCORPORATING A COMPOSITE
LORGNORMAL MODEL IN A RISK-ADJUSTED PREMIUM PRINCIPLE: APPLICATION TO
GAM’S AUTOMOBILE INSURANCE BRANCH
Abstract
This paper presents a formula for calculating a reinsurance premium
which has been
determined by incorporating a lognormal-burr model into a risk-adjusted
premium calculating
principle called the PH-transform principle. The lognormal-burr model
has been selected and
validated as the best fitting model for the used insurance data among
the eight candidates of
composite lognormal models. The formula has then been applied in
calculating reinsurance
premiums for an automobile insurance branch under an excess of loss
non-proportional
reinsurance treaty.