Session 1: Sports Economics – Chair: Greg Matthews

Speaker: Hashan Peiris, PhD candidate of Statistics and Actuarial Science, Simon Fraser University

Title: Modeling player injuries as compound risks

Abstract: The guaranteed salaries of players in top professional leagues have grown substantially in recent years. Thus, the need for insurance policies that financially protect both teams and players in the event of injuries has become more commonplace. Despite the growing prevalence of such insurance products, there is a paucity of actuarial analysis regarding those products. This study presents the first known actuarial analysis of player injuries and resulting claims severity using a compound risk model that separately analyzes injury frequency and claim severity. Our model incorporates a covariate analysis using a comprehensive dataset that includes player biographies, player contracts, team travel, player performance, and player injury data. This method identifies key risk factors influencing claim frequency and severity. Subsequently, it suggests premium models and potential risk mitigants. We first summarize this novel dataset of 508 players from the 2022-2023 NBA regular season with 640 unique injury details. We then discuss significant risk factors related to player injuries in the NBA. Consequently, we utilize the proposed premium pricing model to establish fair actuarial insurance rates for NBA players' sports injury insurance. Finally, we discuss the implications of our findings, including potential risk mitigation strategies and the long-term economic impact on player careers and league-wide financial stability.