A Study on Maximizing Insurance Company Profits under Extreme Weather Events Based on an Optimization Model

Abstract

This study investigates the ramifications of extreme weather events on property damage and the consequential claims pressure experienced by insurance companies. An optimization model is proposed to maximize insurance profits by balancing risk factors. Through this model, optimal insurance amounts are determined for two regions: Kentucky, USA, and Taiwan, China. In Kentucky, the predicted optimal insurance amount is $51,040.33, with insurers willing to bear maximum losses of $5,436.27. In Taiwan, the optimal insurance amount is $27,210.1, with maximum acceptable losses of $2,600.43. Furthermore, the study forecasts a decline in insurance amounts over time in Kentucky, attributed to factors such as population growth and real estate development. Additionally, a building conservation index model is introduced to aid in assessing and preserving valuable structures in regions unsuitable for insurance. This model offers a comprehensive approach to building preservation, incorporating cultural, historical, economic, social, and scientific values.