New fuzzy insurance pricing method for giga-investment project insurance

Large industrial investments, also called giga-investments, are a risky business and to attract financing they often require project insurance to mitigate risks. Giga-investments have long economic lives and can often steer their markets: information available is non-stochastic, normative, and often imprecise. The type of uncertainty that faces giga-investments is parametric and structural. We use possibility theory as a mathematical framework for modeling giga-investment profitability and based on the profitability models derive a new and intuitive four-step procedure for pricing giga-investment project insurance that is based on creating a pay-out distribution for the giga-investment project insurance contract. We present a set of numerical illustrations of insurance pricing with the new method.