Simulation as a tool of risk management in general insurance

The rapid development of computer technology and software has brought to the forefront new methods of solving problems, which are based on a qualitatively new approach to the use of IT. The Monte Carlo simulation methods provides approximate solutions to a variety of mathematical problems by performing statistical sampling experiments on computer. In view of either non-existent or very onerous analytical methods of solving real-life situations, there is a significant place for the use of simulation techniques also in the area of insurance mathematics. Determination of the ruin probability of an insurer using simulated values of its surplus is one of the modern forms of control and risk management with the aim of ensuring solvency. The aim of this paper is to show how to use the simulation method for a portfolio of insurance contracts, which fulfil the conditions of the collective risk model.