Click the "Reset" button to return the model to its original state
To change inputs change the value in the white box and click the "Update" button
The outputs will change
The outputs are the loss excedence curve for the book of four houses
The probability column gives the percentile and the loss column gives the loss
For example in the "reset" state, the 90th percentile (0.9055) is a loss of 5.7882
Description
The model measures the risk on a book of four homeowner policies.
There are four houses covered. Each house can have
A buildings claim. Blue box for "Good Economy". Grey box for "Bad Economy"
A contents claim associated with the same event as a buildings claim. Next boxes down.
Solely a contents claim. Bottom row boxes.
For simplicity, all houses have the same probabilities and losses from all events. This is not a restriction of the model it is a simplification for the demo.
The user can alter the probabilities and losses for each type of claim.
The event data are entered twice. Once for a "Good" economy and once for a "Bad" economy.
In the good economy, claim rates are lower but losses are higher. Also there are less instances where there is both a buildings and a contents claim.
In the bad economy, claim rates are higher. Claims are genrally lower, EXCEPT there are more contrents claims for the same event as buildings claims and the losses from these claims are higher. This is to reflect the temptation of fraudulent claims in an economic downturn.
Solvency II benefits
The model parameters are set directly from items that management would discuss: namely
Probabilities of future economic state
The rate and size of building claims in each economic state
The increase and impact of possibly fraudulent claims in each economic state
Moreover, it is clear how this model integrates with the demo asset model. The asset model is driven by the economic state and so is the homeowners.
No need for management to understand why their actuarial department picked 32.785486143% as the correlation between homeowners losses and asset losses to fulfill the Solvency II requirement that the management use the model to drive business decisions.