Random Walks, Fire Damage Amount and Other Paretian Risk Phenomena

Being one of the oldest branches of operations research, actuarial science has accumulated a substantial store of knowledge about the risks associated with living. The present paper will discuss one such question. Although it is relative to a specific problem of fire casualty, it illustrates more generally why the Paretian distribution of incomes and fortunes should constitute “a source of anxiety for the risk theory of insurance.” Very similar mechanisms apply in many other problems.