Correlation and Uncertainty

• Administration Console > Loss Defaults > Correlation and Uncertainty

The Correlation and Uncertainty function enables you to enter the degree, in percentages, to which you believe your contract is correlated. You specify the degree of correlation based on your knowledge of a particular contract. ExampleSuppose a contract contains similar risks, all of which are located near one another; you might specify a correlation factor of 50% or greater, depending on the actual proximity of the locations. Alternatively, for a non-homogeneous contract with widely dispersed locations, you are likely to specify a low degree of correlation, if any.

You can run loss analyses with or without correlation. If you run the analysis with correlation, the engine applies a correlation factor.

You can specify the desired confidence levels for ground-up, retained, and/or gross losses by specifying the upper and lower range of uncertainty percentages. This provides you with the loss percentiles for each event in the distribution. While uncertainty percentages are always included in loss analysis results, you can modify the system defaults.

Set loss defaults for correlation and uncertainty in the Correlation and Uncertainty pane.

Related topics

•       Loss defaults