Evaluation Of Property Insurance Risk Caused by Disasters Based on Analytic Hierarchy Process and Entropy Weight Method

Abstract

In recent years, the frequent occurrence of natural disasters and extreme weather events has become a crisis for insurance companies, as the choice of underwriting policies can greatly impact their interests. In order to comprehensively assess the risks underwritten in a specific region, this paper establishes a model for evaluating the insurance risks of natural disaster property. Firstly, it analyzes the premium amount based on the relationship between demand and price. Then, by employing multiple indicators, it evaluates the severity of disasters in a region using Analytic Hierarchy Process (AHP) and Entropy Weight Method (EWM). Furthermore, it utilizes the Grey Prediction Theory to forecast the frequency of disasters and assess the compensation in that region. Finally, the underwriting risks are analyzed by combining premiums and compensation. Japan and Chile are taken as examples in this study, both exhibiting high underwritten risks, with Chile surpassing Japan. Because Japan has more Emergency Relief Funds, a higher level of disaster prevention education and a significantly larger population than Chile, resulting in smaller losses from disasters and higher insurance payouts.