Extreme PORT for Norwegian fire financial claims: Empirical assessment and financial VAR analysis

Abstract

Selecting appropriate thresholds for modeling extreme financial values is vital in financial institutions. An effective threshold of the financial claims ensures that the model captures significant extreme financial claims without being overly influenced by less extreme, more frequent events. By introducing and analyzing some future insights into the potential severity of rare but impactful financial insurance claims, peaks over a random threshold value-at-risk method enables insurers to better manage their risk exposure. This is crucial for setting appropriate premiums, designing reinsurance contracts, and making informed strategic decisions. In this work, we presented a comprehensive financial risk analysis of the values of financial claims for real data in light of a set of indicators for measuring insurance risks. Some experimental financial results and analyses are presented, in addition to the appropriate engineering financial analysis within the framework of financial risk analysis using real data. This includes decisions on reinsurance purchases, reserve allocation, and diversification of risk portfolios.

Keywords

• Extreme financial loss
• Financial loss
• Threshold value-at-risk
• Mean-of-order P
• Peaks over a random threshold
• Norwegian fire financial claims