BAYESIAN ANALYSIS OF THE COMPOUND COLLECTIVE MODEL: THE NET PREMIUM PRINCIPLE WITH EXPONENTIAL POISSON AND GAMMA–GAMMA DISTRIBUTIONS

Abstract

This article develops a Bayesian analysis of the Compound Collective Model utilizing the Net Premium Principle, considering single-period models. With respect to likelihoods, we used a Poisson distribution for the number of claims and an Exponential distribution for the severity of the accident/event. Gamma distributions were used for the prior distributions. The robustness of the posterior premium was analyzed with respect to the prior distribution specification of the severity of the accident/event, utilizing contamination classes, these being the class of all the distributions and that of all the unimodal distributions with the same mode. Numerical applications of the results obtained were performed.Compound collective model; Bayesian analysis; Robustness analysis.