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Tail Risk in Commercial Property Insurance

by 1,* and 1,2
Department of Finance, Imperial College Business School, Imperial College London, LondonSW7 2AZ, UK
Civil & Environmental Engineering Department, Faculty of Engineering, Imperial College London, London SW7 2AZ, UK
Author to whom correspondence should be addressed.
Risks 2014, 2(4), 393-410;
Received: 6 April 2014 / Revised: 26 July 2014 / Accepted: 30 July 2014 / Published: 29 September 2014
(This article belongs to the Special Issue Risk Management Techniques for Catastrophic and Heavy-Tailed Risks)
We present some new evidence on the tail distribution of commercial property losses based on a recently constructed dataset on large commercial risks. The dataset is based on contributions from Lloyd’s of London syndicates, and provides information on over three thousand claims occurred during the period 2000–2012, including detailed information on exposures. We use occupancy characteristics to compare the tail risk profiles of different commercial property exposures, and find evidence of substantial heterogeneity in tail behavior. The results demonstrate the benefits of aggregating granular information on both claims and exposures from different data sources, and provide warning against the use of reserving and capital modeling approaches that are not robust to heavy tails. View Full-Text
Keywords: commercial property insurance; exposure rating; heavy tails; tail index; tail regression commercial property insurance; exposure rating; heavy tails; tail index; tail regression
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MDPI and ACS Style

Biffis, E.; Chavez, E. Tail Risk in Commercial Property Insurance. Risks 2014, 2, 393-410.

AMA Style

Biffis E, Chavez E. Tail Risk in Commercial Property Insurance. Risks. 2014; 2(4):393-410.

Chicago/Turabian Style

Biffis, Enrico, and Erik Chavez. 2014. "Tail Risk in Commercial Property Insurance" Risks 2, no. 4: 393-410.

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