Directors Liability Insurance Pricing

Directors Liability Insurance is a response to the directors and officers making economic losses to a third person in the implementation of corporate responsibility, then the insurance company bear the economic liability. With the development of Chinese security market, the civil suit for compensation from shareholders, creditors and internal staff which directors and officers in listed companies subjected to is growing, so it is essential to establish a directors liability insurance system as soon as possible.However, there are still many real problems difficult to define in the course of system establishment. The premium rate decision is one of them: on one hand, Directors Liability Lnsurance is different from other types of insurance. With the short time of establishment, there is no history data available.It is difficult to achieve the desired effect by the traditional way of pricing; On the other hand, as its characteristics, subjective factors account for a large proportion, which are difficult to conceptualize into actuarial formula.All these bring enormous difficulties to the premium rate decision.This article established the Fuzzy Comprehensive Pricing Model for determination of Directors Liability Insurance premiums based on fuzzy mathematics and actuarial theories. The basic idea is as follow: First, making Internal Rate of Return (IRR) fuzzy which belongs to non-life insurance pricing model. On the assumption that the expected losses has been estimated,the expected losses and discount rate expressed by fuzzy numbers, try to use fuzzy mathematics method to solve the fuzzy premium. Then estimate the most important factor- loss probability, through the transformed Fuzzy Comprehensive Evaluation Model to deepen the model. Finally, make an empirical simulation test.The main contents of this article is:It started at the relevant knowledge of IRR,and then expounded on the basic concepts,computing and applications of fuzzy logic in the financial fuzzy mathematics.Then structure fuzzy IRR model using the actuarial theory, according to the characteristics of Directors Liability Insurance. Under the assumption of certain data,we obtain good results by fuzzy IRR model,then point out the advantages of fuzzy pricing compared with the traditional pricing methods. We estimate the loss probability using Fuzzy Comprehensive Evaluation Model,and demonstrate it through the example that Guizhou Moutai Directors Liability Insurance. The premium rate calculation of eight listed companies verifies the validity of the model. Finally, we pointed out the actual significance and prospects of the development of Fuzzy Comprehensive Pricing Model in Director Liability Insurance.