TITLE
"Total Annual Loss Distribution: A Risk Management Decision
Making Tool," Journal
of Insurance Issues, Hamwi, Iskandar S., 1985,
Vol. VIII, No. 1: 82-93.
ABSTRACT
The total annual loss (TAL) distribution is an important tool
in risk management theory especially in the areas of determining
contingency reserves and setting retention limits in stop-loss
or excess-loss reinsurance treaties contemplated particularly
by a young and emerging insurance company. This distribution is
also an essential decision-making tool for a corporation attempting
to implement a self-insurance program covering certain perails.
The purpose of this paper is to examine briefly these two approaches
and, more specifically, to indicate that, given the right set
of circumstances, the Central Limit Theorem (CLT) approach is
theoretically sound and constitutes and easier and more efficient
way of obtaining the desired results. A method for enhancing the
accuracy of these results by using loss information obtained from
several years is also presented.
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