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Estimating extreme losses for the Florida Public Hurricane Model—part II

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Abstract

Rising global temperatures are leading to an increase in the number of extreme events and losses (http://www.epa.gov/climatechange/science/indicators/). Accurate estimation of these extreme losses with the intention of protecting themselves against them is critical to insurance companies. In a previous paper, Gulati et al. (2014) discussed probable maximum loss (PML) estimation for the Florida Public Hurricane Loss Model (FPHLM) using parametric and nonparametric methods. In this paper, we investigate the use of semi-parametric methods to do the same. Detailed analysis of the data shows that the annual losses from FPHLM do not tend to be very heavy tailed, and therefore, neither the popular Hill’s method nor the moment’s estimator work well. However, Pickand’s estimator with threshold around the 84th percentile provides a good fit for the extreme quantiles for the losses.

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Acknowledgements

The authors are grateful to the editor and an anonymous referee for their comments which helped improve this paper greatly.

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Authors and Affiliations

  1. Department of Mathematics and Statistics, Florida International University, Miami, FL, 33199, USA

    Sneh Gulati & Florence George

  2. Department of Finance, Florida International University, Miami, FL, 33199, USA

    Shahid Hamid

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  1. Sneh Gulati
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  2. Florence George
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  3. Shahid Hamid
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Correspondence to Sneh Gulati.

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Gulati, S., George, F. & Hamid, S. Estimating extreme losses for the Florida Public Hurricane Model—part II. Theor Appl Climatol 131, 1191–1202 (2018). https://doi.org/10.1007/s00704-016-2029-x

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  • DOI: https://doi.org/10.1007/s00704-016-2029-x

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