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Document Details :

Title: Premium Calculation
Subtitle: Why Standard Deviation Should be Replaced by Absolute Deviation
Author(s): DENNEBERG, Dieter
Journal: ASTIN Bulletin
Volume: 20    Issue: 2   Date: November 1990   
Pages: 181-190
DOI: 10.2143/AST.20.2.2005441

Abstract :
Average absolute (instead of quadratic) deviation from median (instead of expectation) is better suited to determine the safety loading for insurance premiums than standard deviation: The corresponding premium functionals behave additive under the practically relevant risk sharing schemes between first insurer and reinsurer.