A Practical Guide to Single Parameter Pareto Distribution

The actuarial literature has discussed several candidates for size-of-loss distributions-log normal, Weibull, multi-parameter Pareto, gamma, as well as others. However, despite the demonstrated success of these distributions, there is a dependence on techniques such as empirical data, judgment, or at times some unwieldy formulae. This suggests that there may be a need for a size-of-loss distribution that is relatively easy to apply in practice. The one-parameter Pareto is an example of such a distribution. Its use may be restricted to the tail of a distribution, but it is easy to apply. The formulae for the mean, variance, and the variance of the aggregate loss distribution, but it is easy to apply. the formulae for the mean, variance, and the variance of the aggregate loss distributions are simple in form and may be used as quick approximations in many cases. Reinsurance Research - Loss Distributions, Size of