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.

and CEPR 4 1 We are very grateful to Paul Besson (from Kepler-Chevreux), Dion Bongaerts, Catherine d'Hondt, Thierry Foucault, Carole Gresse, Alexander Guembel, Marius Zoican and seminar participants at the 3rd Forum "Market Microstructure: Confronting Many Viewpoints" (Paris) for providing useful comments. We especially thank Eurofidai-Bedofih for providing us the data. Laurence Lescourret is research fellow at CREST. Financial support from the ANR (ANR-16-CE26-0008) is gratefully acknowledged. Part of this research was carried out while Sophie Moinas was appointed Judith C. and William G. Bollinger Visiting Professor at the Wharton School, University of Pennsylvania, and benefited from the support from the CNRS.

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