Natural catastrophes cause insurance losses in several different lines of business. An approach to modelling the dependence in loss severities is to assume that they are related to the intensity of the natural disaster. In this paper we introduce a factor model and investigate the extreme dependence. We derive a specific extreme dependence structure when considering an heavy-tailed intensity. Estimation procedures are presented and their moderate sample properties are compared in a simulation study. We also motivate our approach by an illustrative example from storm insurance.
LESCOURRET, L. and ROBERT, C.Y. (2006). Extreme Dependence of Multivariate Catastrophic Losses. Scandinavian Actuarial Journal, pp. 203-225.