Journal article
Characterizations of optimal reinsurance treaties: a cost-benefit approach
Scandinavian actuarial journal, Vol.2017(1), pp.1-28
01/02/2017
DOI: 10.1080/03461238.2015.1054303
Abstract
This article investigates optimal reinsurance treaties minimizing an insurer's risk-adjusted liability, which encompasses a risk margin quantified by distortion risk measures. Via the introduction of a transparent cost-benefit argument, we extend the results in Cui et al. [Cui, W., Yang, J. & Wu, L. (2013). Optimal reinsurance minimizing the distortion risk measure under general reinsurance premium principles. Insurance: Mathematics and Economics 53, 74-85] and provide full characterizations on the set of optimal reinsurance treaties within the class of non-decreasing, 1-Lipschitz functions. Unlike conventional studies, our results address the issue of (non-)uniqueness of optimal solutions and indicate that ceded loss functions beyond the traditional insurance layers can be optimal in some cases. The usefulness of our novel cost-benefit approach is further demonstrated by readily solving the dual problem of minimizing the reinsurance premium while maintaining the risk-adjusted liability below a fixed tolerance level.
Details
- Title: Subtitle
- Characterizations of optimal reinsurance treaties: a cost-benefit approach
- Creators
- Ka Chun Cheung - Department of Statistics and Actuarial Science, The University of Hong KongAmbrose Lo - Department of Statistics and Actuarial Science, The University of Iowa
- Resource Type
- Journal article
- Publication Details
- Scandinavian actuarial journal, Vol.2017(1), pp.1-28
- Publisher
- Taylor & Francis
- DOI
- 10.1080/03461238.2015.1054303
- ISSN
- 0346-1238
- eISSN
- 1651-2030
- Language
- English
- Date published
- 01/02/2017
- Academic Unit
- Statistics and Actuarial Science
- Record Identifier
- 9984083211402771
Metrics
13 Record Views