A new class of large claim size distributions: Definition, properties, and ruin theory

Abstract

We investigate a new natural class $\mathcal{J}$ of probability distributions modeling large claim sizes, motivated by the ‘principle of one big jump’. Though significantly more general than the (sub-)class of subexponential distributions $\mathcal{S}$, many important and desirable structural properties can still be derived. We establish relations to many other important large claim distribution classes (such as $\mathcal{D}$, $\mathcal{S}$, $\mathcal{L}$, $\mathcal{K}$, $\mathcal{OS}$ and $\mathcal{OL}$), discuss the stability of $\mathcal{J}$ under tail-equivalence, convolution, convolution roots, random sums and mixture, and then apply these results to derive a partial analogue of the famous Pakes–Veraverbeke–Embrechts theorem from ruin theory for $\mathcal{J}$. Finally, we discuss the (weak) tail-equivalence of infinitely-divisible distributions in $\mathcal{J}$ with their Lévy measure.