We propose a model for an insurance loss index and the claims process of a single insurance company holding a fraction of the total number of contracts that captures both ordinary losses and losses due to catastrophes. In this model we price a catastrophe derivative by the method of utility indifference pricing. The associated stochastic optimization problem is treated by techniques for piecewise deterministic Markov processes. A numerical study illustrates our results.
CITATION STYLE
Eichler, A., Leobacher, G., & Szölgyenyi, M. (2017). Utility indifference pricing of insurance catastrophe derivatives. European Actuarial Journal, 7(2), 515–534. https://doi.org/10.1007/s13385-017-0154-2
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