DYNAMIC FINANCIAL ANALYSIS WITH DEPENDENCE BETWEEN MOTOR OWN DAMAGE INSURANCE AND COMPULSORY MOTOR INSURANCE USING COPULAS – THE CASE OF TURKEY

Abstract

Insurance companies can measure their ruin probability and default risk more realistically and have strong management strategies with Dynamic Financial Analysis (DFA). In this paper, the influence of the dependence between motor own damage insurance and compulsory motor insurance, that are two really important lines of business for nonlife insurance, on the risk, return and performance in a nonlife insurer’s DFA is investigated. The dependency is integrated to the DFA framework using copulas concept. In the application non-life insurance data of Turkey is used.