An Extension of Panjer's Recursion

Abstract

AbstractSundt and Jewell have shown that a nondegenerate claim number distribution Q = {qn}nϵN0 satisfies the recursionfor all n≥0 if and only if Q is a binomial, Poisson or negativebinomial distribution. This recursion is of interest since it yields a recursion for the aggregate claims distribution in the collective model of risk theory when the claim size distribution is integer-valued as well. A similar characterization of claim number distributions satisfying the above recursion for all n ≥ 1 has been obtained by Willmot. In the present paper we extend these results and the subsequent recursion for the aggregate claims distribution to the case where the recursion holds for all n ≥ k with arbitrary k. Our results are of interest in catastrophe excess-of-loss reinsurance.