Research on sustainability of property insurance based on insurance stochastic model

This paper analyzes the sustainability of property insurance under extreme weather events using an insurance stochastic model in Europe and South America. First, disaster risk losses in Estonia and Mexico City were assessed and modeled using the Kramer-Lundberg risk model. Then, the approximate result of bankruptcy probability under specific initial capital distribution is obtained by parameter adjustment and calculation. The study found that in order to maintain a 10% profit, premiums in high-risk areas would have to be 4.6 times higher than those in medium-risk areas. Therefore, the price of buying insurance in Estonia must be 4.6 times higher than in Mexico City to remain profitable. This paper provides decision support for insurance companies in changing environment to ensure long-term stable development.