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Relative Reinsurance Retention Levels

Published online by Cambridge University Press:  29 August 2014

David C.M. Dickson  and
Howard R. Waters
David C.M. Dickson
Affiliation:
Centre for Actuarial Studies, Faculty of Economics and Commerce, University of Melbourne, Victoria 3052, Australiae-mail:ddickson@cupid.ecom.unimelb.edu.au
Howard R. Waters
Affiliation:
Department of Actuarial Mathematics and Statistics, Heriot-Watt University, Midlothian EH14 4AS, Great Britain, e-mail:H.R.Waters@ma.hw.ac.uk
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Abstract

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The problem of determining optimal retention levels for a non-life portfolio consisting of a number of independent sub-portfolios was first discussed by de Finetti (1940). He considered retention levels as optimal if they minimised the variance of the insurer's profit from the portfolio subject to the constraint of a fixed level of expected profit. In this paper we consider a similar problem, changing the criterion for optimality to minimising the probability of ruin, either in discrete or continuous time. We investigate this problem through a series of case studies based on a real portfolio.

Keywords

Reinsuranceoptimal retention levelsfinite time ruintranslated gamma process
Type
Articles
Information
ASTIN Bulletin: The Journal of the IAA , Volume 27 , Issue 2 , November 1997 , pp. 207 - 227
Copyright
Copyright © International Actuarial Association 1997

References

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