WG Risk : "On the Insurance of Environmental Risks: Modeling and Pricing with Mean-Reverting Regime-Switching Lévy Processes"

The Working Group on Risk - CREAR, with the support of the ESSEC IDO dpt/Ceressec, Institut des Actuaires, Labex MME-DII (CY), and the group Risques AEF - SFdS, has the pleasure to invite you to the seminar by:

Prof. Olivier LE COURTOIS, EMLyon Business School, Lyon, France

Dr. Olivier Le Courtois is full professor at EMLyon Business School. His areas of interest are probability and calculus, which he has applied to finance, insurance, and economics. He is an alumnus of Ecole Normale Supérieure de Lyon and holds a PhD and a Habilitation in Management Science, and an Agrégation in Physics. He is a Fellow of the Society of Actuaries (FSA, QFI track) and has also obtained the following designations: CFA, CERA, and FRM. Olivier is a former bank engineer and is the founder and ex-director of the CEFRA research center of EMLyon Business School. A seasoned consultant, he is specialized in the modeling of extreme risks in finance and insurance. He is the author of a book published by the Imperial College Press and of several other books, and his research papers have been published in journals such as Insurance: Mathematics and Economics, the Journal of Banking and Finance, the Journal of Mathematical Economics, Mathematical Finance, and the Journal of Economic Dynamics and Control. His contributions have received eight awards, such as the Kulp-Wright book award of the American Risk and Insurance Association.

“On the Insurance of Environmental Risks: Modeling and Pricing with Mean-Reverting Regime-Switching Lévy Processes”

The insurance business is a core component of the economic system, which is faced with expanding environmental challenges. By adequately protecting against climate risks, insurance companies are an important factor in ensuring that other businesses persist and grow. The claims associated with environmental risks, such as shrinking soils or hail, are quickly increasing in both severity and frequency, where predictability is an additional key concern for insurance companies. This study constructs and compares several models to tackle and price environmental risks. These models mean-revert towards a seasonality function, present jumps with infinite arrival rates - via Lévy processes, and display a regime switching nature to allow for a variety of scenarios for the coming future years. We introduce structural and reduced-form frameworks, that is, frameworks that are more phenomenological or more efficiency-based. An empirical illustration and a sensitivity analysis conclude the study.

Dual format:

ESSEC Paris La Défense (CNIT), Room TBA, and via Zoom, please click here .