An Implementation of a simple Frequency-Severity Model allowing for correlated Severity Distributions

The analysis provides an implementation of a simple frequency-severity model allowing for the consideration of correlated claims or loss severity distributions. The focus lies on log-normally distributed loss severities and negative binomial distributed frequencies, embedded in a simulation model. Both distribution types can be substituted within the implementation by arbitrary other distribution types straightforwardly. Initially, the analysis will address some basic theory regarding both distribution types. Subsequently, the method of aggregation and the generated R code will be presented. This code accurately represents and illustrates the model generated. Finally the distribution of the resulting quantiles will be dealt with.