Non-Life Insurance Pricing : Statistical Mechanics Viewpoint

Details Non-Life Insurance Pricing : Statistical Mechanics Viewpoint Non-Life Insurance Pricing : Statistical Mechanics Viewpoint

2003-05-04

arxiv.org/abs/cond-mat/0305062v4

Physics

Condensed Matter

Statistical Mechanics

10 pages, 5 figures

Scientific paper

We consider the insurance company as a physical system which is immersed in its environment (the financial market). The insurer company interacts with the market by exchanging the money through the payments for loss claims and receiving the premium. Here in the equilibrium state we obtain the premium by using the canonical ensemble theory, and compare it with the {\it Esscher} principle, the actuaristic well known formula for premium calculation. We simulate the case of automobile insurance for quantitative comparison.

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