2023 Australasian Actuarial Education and Research Symposium

Zhen Dong Chen

UNSW Sydney

Insurance pricing under joint extremes

This is joint work with Peiman Asadi, Qihe Tang

The compounding impact of extreme rainfall and heavy winds can lead to devastating disasters, such as floods. This paper presents a novel approach to modeling the joint extremes of precipitation and wind speed. A case study is conducted using time series data from weather observatories across NSW, Australia. Challenges arise when applying the peaks-over-threshold analysis to a substantial number of datasets. To address these challenges, we develop an automatic threshold selection method and an automatic declustering technique. Furthermore, we introduce a proxy based on these joint extremes and create a heatmap to identify any significant trends. This proxy has the potential to provide valuable insights for pricing climate risk within the insurance context.