• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

return periods

J

jensen

Member
Hi

In cat model result, is the reciprocal of return period, the frequency?? I thought it's the exceedence probability.
 
Yeah, I think you are right. It's not the frequency but the exceedance probability.
 
In general it's frequency. An event with a return period of 100 years has an annual frequency of 0.01. So for example, an earthquake in a relatively undeveloped and uninsured part of the world might have a return period of 100 years whereas an earthquake in a relatively developed and well-insured area might have a return period of 50 years. Despite the fact that the latter is likely to be more costly to the insurer it has a lower return period and higher frequency.

The reason it can sometimes look like an exceedance probability is as follows. Suppose you are looking at an AEP curve, which as you know gives the probability of the total losses in a given time period - let's say a year - exceeding a given amount. Suppose that the event that we lose £100m or more in a year has a probability of 1%. It therefore also has an annual frequency of 1% and a return period of 100 years.

So return period is the reciprocal of frequency, but in certain contexts frequency and exceedance probability are the same.
 
You must log in or register to reply here.
Back
Top