Natural Catastrophe Risk Modeling in Non-Life (Re)insurance Companies Approach: Optimization of Cat. XoL Reinsurance Contract Layering

In this paper, we use reinsurance as a risk management tool in order to handle natural catastrophe risks. Cat. XoL contracts play vital roles in risk management of non-life insurance company. Using non-optimal contracts can impose adverse effects on ceding company’s solvency. In this paper, we address the catastrophe modeling, then a truncated gamma distribution is applied to accumulated exposures of a direct insurance company. After estimating the parameters of the proposed model using the maximum likelihood (ML), and an earthquake simulation in Tehran, we prepared an event loss table (ELT) for the insurance company. Finally, all matters would be analyzed in a practical framework by using an actual contract.