Research on insured risk of insurance companies based on TOPSIS comprehensive evaluation model and regression analysis

Abstract

Extreme weather events due to climate change are one of the most significant risks facing the world today, and while insurers can help society share the resulting losses, for example through premium pricing, the industry is also facing increasing challenges. To address the issue of meeting the needs of insurers for long-term health in the face of current challenges, we have developed a risk assessment model and a profitability model for insurers, with a focus on the U.S. East Coast. In the risk assessment model we are based on entropy weighting method to find the weight of TOPSIS superiority and inferiority of the solution distance method to derive the score of each evaluation object, and ultimately obtain the low-risk, medium-risk, high-risk intervals are [0,0.014]; [0.014,0.055]; [0.055,0.386]. The profit function was built using multiple regression in the profitability model: , and to draw the final conclusion: when an insurer is in a medium-low risk area, or a high-risk area but with a profit value greater than 0, the insurer can write in that area and take on a certain amount of risk. This conclusion will help insurers make better insurance choices in light of the current risk challenges and will benefit the long-term health of the insurance industry.