Ruin probabilities in finite and discrete time - a case study on General Insurance Companies

Abstract

The following paper presents a research done on the probability of ruin in five general insurance companies in Kenya based on data from their financial statements in the past ten years (2004 - 2013). Past data was used to determine the amount of capital, the parameters for the claims distribution which were assumed to have a normal distribution. The average annual premium for each company was also determined from the past data and the annual growth rate for the amount of capital. The annual premium growth rate was determined from the industry insurance statistics using net premiums for the past ten years. The study involved all lines of businesses in the companies which were equal and similar in all the companies. By varying the premium growth rate, future incidences of ruin were determined. The amount of capital to be held was analyzed using an excel function.