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Dynamic response of insurance systems with delayed profit/loss sharing feedback to isolated unpredicted claims

Published online by Cambridge University Press:  20 April 2012

L. A. Balzer  and
S. Benjamin
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Summary

A mathematical model of the dynamic behaviour of an insurance system with delayed profit/loss sharing feedback is developed. The model is then subjected to a disturbance input consisting of an isolated group of unpredicted claims and the dynamic responses of cash flow and accumulated cash flow determined. Increasing delays are seen to lead first to undesirable oscillatory responses and eventually to instability. where the responses become unbounded. Such behaviour is noted to be independent of the type of business and to be a property of the feedback mechanism and not related to the type of disturbance input.

Type
Research Article
Information
Journal of the Institute of Actuaries , Volume 107 , Issue 4 , December 1980 , pp. 513 - 528
Copyright
Copyright © Institute and Faculty of Actuaries 1980

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References

Cadzow, J. A. (1973). Discrete-Time Systems—An Introduction with Interdisciplinary Applications, Prentice-Hall.Google Scholar
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