On the Actuarial Simulation of the General Pareto Distribution of Catastrophe Loss

摘要

Precisely estimating of Catastrophe loss is not only the foundation of risk analysis, but also the premise of product design and the practice of insurance compensation. The Law of Large Numbers generally assumes risk obeys normal distribution that reduces the accuracy of damage assessment and influences the pricing of catastrophe insurance due to negligence of the extreme value at both sides of the distribution. Data more than 100 million yuan of earthquake disaster loss from 1969 to 2011 presents the characteristics of right skew peak, excess kurtosis and heavy-tail. Furthermore, the comparison of QQ plot, parameter estimation as well as test of model parameters between Normal distribution, Exponential distribution, Weibull distribution and Pareto distribution shows that the generalized Pareto distribution fits the earthquake loss perfectly, and significantly improves the estimate precision.