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On 1 January 2018, an insurer sells 200 policies, each with a one-year term, to business owners wishing to insure against damage caused by vandalism.
- On 1 January 2018, an insurer sells 200 policies, each with a one-year term, to business owners wishing to insure against damage caused by vandalism. The insurer knows that the only likely date a claim will be made is on 1 May when the May Day demonstrations take place.
The annual probability of making a claim on each policy is 30%. Claim amounts follow a Pareto distribution with parameters alpha=5 and lambda=8000.
Calculate the mean and standard deviation of the aggregate claims.
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