YAI Connect: Premium Valuation in Natural Event Insurance: An Application to the Australian Case

he aim of this work is to calculate the risk premium required to insure buildings against natural hazards, with a specific focus on storm events in Australia. Two approaches are considered for premium estimation: a Generalized Linear Model (GLM) and a two-zone model. The latter is based on the framework proposed by Charpentier, Barry, and James (2021) in “Insurance Against Natural Catastrophes: Balancing Actuarial Fairness and Social Solidarity.” The two models differ in terms of data requirements and their ability to balance risk-based pricing with social solidarity considerations. Beyond the choice of a more or less sophisticated methodology, what emerges from this analysis is that, in the coming years, insurance companies will need to pay close attention to these issues, investing in strategies that are both profitable for the companies themselves and highly protective for policyholders.