ABSTRACT
In this chapter we consider applications of the techniques which were
introduced i n previous chapters. A t this stage we w i l l restrict con-
sideration to the stochasticity of the c la im process and to a short time
hor izon, in most cases one year. Notwi ths tand ing this l imi ta t ion , it is
still possible to consider some interesting problems, such as evaluating
the fluctuation range of c la im amounts and assessing the corre-
sponding capi ta l requirements, analysing the effect of reinsurance
and the level of net retention, as well as the basic mathematics of rating
reinsurance contracts. These topics are also fundamental bui ld ing-
blocks for later chapters, where the time hor izon w i l l be extended
and vi ta l features such as inflation, cycl ical effects, asset risks, and
other matters, w i l l be considered, inc luding the mutua l interdepen-
dence between successive periods.