Insurance Risk Models II

This subject is not offered in 2014.

100 hours

ACTL90004 Insurance Risk Models

ACTL40003 Risk Theory II

For the purposes of considering request for Reasonable Adjustments under the Disability Standards for Education (Cwth 2005), and Student Support and Engagement Policy, academic requirements for this subject are articulated in the Subject Overview, Learning Outcomes, Assessment and Generic Skills sections of this entry.

It is University policy to take all reasonable steps to minimise the impact of disability upon academic study, and reasonable adjustments will be made to enhance a student's participation in the University's programs. Students who feel their disability may impact on meeting the requirements of this subject are encouraged to discuss this matter with a Faculty Student Adviser and Student Equity and Disability Support: http://services.unimelb.edu.au/disability

Topics considered in this subject include premium principles, including variance principle, Esscher principle, risk adjusted principle; applications of utility theory, premium calculation and optimal reinsurance retention levels; reinsurance problems; ruin theory, Lundberg's inequality, explicit solutions for the probability of ultimate ruin, application of Panjer's recursion formula, the probability and severity of ruin, the effect of reinsurance on ruin probabilities.

On successful completion of this subject, students should be able to:

• Apply relevant pre-requisite knowledge of mathematics, probability theory and statistics in the solution of a range of practical problems;
• Describe the basic concepts of utility theory and apply them to insurance problems;
• Explain the concepts of a premium calculation principle and show whether a premium calculation principle satisfies certain properties;
• Derive Lundberg's inequality;
• Describe the effect of simple reinsurance arrangements on ruin probabilities;
• Derive explicit solutions for the ruin probability in the classical risk model;
• Calculate approximations to ruin probabilities, explaining the rationale behind each approach.

• A 50-minute mid-semester test (20%)
• A 1,000 word written assignment due second half of the semester (10%)
• A 2-hour end-of-semester examination (70%)

You will be advised of prescribed texts by your lecturer.

This subject is not available as a breadth subject.

On successful completion of this subject students should have enhanced their skills in:

• High level of development: written communication; problem solving; statistical reasoning; application of theory to practice; interpretation and analysis.