Epidemiological Modelling in Life Insurance

Specialeforsvar: Laura Sylow Francis

Titel:  Epidemiological Modelling in Life Insurance

Abstract: The coronavirus pandemic has created a new awareness of epidemics, making it relevant for insurance companies to consider the risk related to infectious diseases. This paper extends more traditional insurance models to include epidemiological models. In the framework of Markov models, differential equations are used to model the dynamics of an epidemic. The main idea is to model the transition intensities to depend on the probabilities in the Markov model. As demographic changes in the population can affect an epidemic, these are also included into the model. This extended model allows for description of insurance products covering the risks of an epidemic. Various insurance products are examined in an epidemic setting, and payment streams and the state-wise reserves are analysed. This is compared to results from the literature, indicating the extended Markov model captures the behaviour of an epidemic, and it performs just as well as the known models. In addition to this, it allows for a broad range of insurance applications, as the epidemic dynamics are incorporated into the well-known framework of Markov models. This makes the extended Markov model a suitable tool to analyse risks in the insurance industry as well as the society in general.


Vejleder:  Mogens Steffensen
Censor:    Magnus Tor Ry Hessler, Danica Pension