This paper applies a bivariate lognormal distribution to price a property policy with property damage and business interruption cover subject to an attachment point, separate deductibles, and a combined limit. Curve-fitting tasks for univariate probability distributions are compared with the tasks required for multivariate probability distributions. This is followed by a brief discussion of the data used, data-related issues, and adjustments. Selection of a parametric multivariate size of loss distribution, estimation of the parameters of the selected distribution, and goodness of fit are discussed in reference to the bivariate lognormal distribution. Finally, an algorithm is provided for estimating the average loss cost based on a bivariate lognormal distribution by taking into consideration the loss-sensitive features of the policy.
