A1007
Title: Parametric reinsurance for extreme claims
Authors: Olivier Lopez - Ensae IP Paris (France) [presenting]
Abstract: Parametric (or index-based) insurance products are increasingly used to cover emerging risks, especially the upper segments not covered by traditional insurance. The idea is not to cover directly the risk but to compute the compensation based on the value of a measurable index just after the claim. From a risk management perspective, controlling this index is easier, allowing insurability. The particular case is discussed, where the loss distribution is the heavy tail (Pareto tail) and may not even have an expectation. Adapting a utility framework, it is shown how to conceive optimal reinsurance products based on the parametric approach.
