An actuarial approach for modeling pandemic risk
(2020) , 25 pages
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ISBADP202025_Hainaut_Anactuarialapproachformodelingpandemicrisk_oa.pdf
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- Abstract
- This article proposes a model for pandemic risk and two stochastic extensions. It is designed for actuarial valuation of insurance plans providing healthcare and death benefits. The core of our approach relies on a deterministic model that is an efficient alternative to the susceptible-Infected-Recovered (SIR) method. This model explains the evolution of the first waves of COVID-19 in Belgium, Germany, Italy and Spain. Furthermore, it is analytically tractable for fair pure premium calculation. In a first extension, we replace the time by a Gamma stochastic clock. This approach randomizes the timing of the epidemic peak. A second extension consists in adding a Brownian noise and a jump process to explain the erratic evolution of the population of confirmed cases. The jump component allows for local resurgences of the epidemic.
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Hainaut, D. (2020). An actuarial approach for modeling pandemic risk (ISBA Discussion Paper 2020/25). https://hdl.handle.net/2078.5/269245