Applying of the Extreme Value Theory for determining extreme claims in the automobile insurance sector: Case of a China car insurance

TL;DR

This paper applies Extreme Value Theory to analyze and identify extreme insurance claims in China's automobile sector, focusing on the tail behavior of claim sizes across different policyholder classes.

Contribution

It introduces an empirical approach to assess extreme claim sizes in Chinese car insurance, filling a gap in tail risk analysis for the sector.

Findings

Identified the distribution of extreme claims across policyholder classes

Provided insights into the tail risk of automobile insurance claims

Enhanced understanding of the risk of large claims in Chinese car insurance

Abstract

According to the Chinese Health Statistics Yearbook, in 2005, the number of traffic accidents was 187781 with total direct property losses of 103691.7 (10000 Yuan). This research aims to fill the gap in the literature by investigating the extreme claim sizes not only for the entire portfolio. This empirical study investigates the behavior of the upper tail of the claim size by class of policyholders.