Keywords
reported loss amount
asymptotic claim reporting rate
catastrophic loss index
nominal claim reporting rate
How to Cite
Abstract
This paper developes a simple discrete model to determine catastrophic loss indexes underlying insurance-linked derivatives. To this aim, we consider just a single catastrophe ocurring in each interval, whose total amount results from the sum of two variables: the incurred-but-not-yet-reported claims amount and that of the reported claims. Our model’s core assumption is that the incurred-but-not-yet-reported claims amount decreases proportionally in time at the rate of a constant named ''nominal claim reporting rate,'' which coincides with the effective claim reporting rate in the case of unitary periods, and which works as a nominal rate of discount.
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