A generalized crossed classification credibility model

In the crossed classification credibility (CCC) model of Dannenburg [Crosse d classification credibility models. In: Transactions of the 25th Internati onal Congress of Actuaries, Vol. 4, 1995, pp. 1-35], every contract in an i nsurance portfolio is assumed to be affected by the same number of risk fac tors. One can, however, imagine situations where this may be a restriction to the model. We thus propose a generalization of the original model where the number of risk factors can vary per contract. This is done by introduci ng a new category for each risk factor representing the fact of not being a ffected by the risk factor. The main effect on formulae is that credibility factors are replaced by some other function when used as weights. (C) 2001 Elsevier Science B.V. All rights reserved.