Ruin Theory Starter Kit #1

Document description

The aim of the paper is to provide general insurance actuaries a starting point for evaluating and engaging with ruin theory in a practical manner. Towards this goal, the paper undertakes three tasks. First, it sets out the basic mathematical principles behind the classical model with mixed exponential claim distributions. In particular, this part contributes to the reference literature in that the discussion is extraordinarily detailed. Second, it highlights risk management questions that could be contemplated already by this classical model. A simple but novel modification of the model is discussed to allow dividend considerations to influence the dynamics. Third, suggestions of recent enhancements of the model are made for the practitioners to further consider. For better appreciation of the concepts, a demonstration spreadsheet accompanies this paper.