Reinsurance, ruin and solvency issues: some pitfalls
AbstractIn this paper, we consider optimal reinsurance from an insurer's point of view. Given a (low) ruin probability target, insurers want to find the optimal risk transfer mechanism, i.e. either a proportional or a nonproportional reinsurance treaty. Since it is usually admitted that reinsurance should lower ruin probabilities, it should be easy to derive an efficient Monte Carlo algorithm to link ruin probability and reinsurance parameter. Unfortunately, if it is possible for proportional reinsurance, this is no longer the case in nonproportional reinsurance. Some examples where reinsurance might increase ruin probabilities are given at the end, when claim arrival and claim size are not independent.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by HAL in its series Working Papers with number hal-00463381.
Date of creation: 12 Mar 2010
Date of revision:
Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00463381/en/
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/
Dependence; Reinsurance; Ruin probability; Solvency requirements;
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dickson,David C. M., 2005. "Insurance Risk and Ruin," Cambridge Books, Cambridge University Press, number 9780521846400, October.
- Albrecher, Hansjorg & Boxma, Onno J., 2004. "A ruin model with dependence between claim sizes and claim intervals," Insurance: Mathematics and Economics, Elsevier, vol. 35(2), pages 245-254, October.
- Centeno, Lourdes, 1986. "Measuring the effects of reinsurance by the adjustment coefficient," Insurance: Mathematics and Economics, Elsevier, vol. 5(2), pages 169-182, April.
- Gyllenberg, Mats & S. Silvestrov, Dmitrii, 2000. "Cramer-Lundberg approximation for nonlinearly perturbed risk processes," Insurance: Mathematics and Economics, Elsevier, vol. 26(1), pages 75-90, February.
- Dickson, David C. M. & Waters, Howard R., 1996. "Reinsurance and ruin," Insurance: Mathematics and Economics, Elsevier, vol. 19(1), pages 61-80, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).
If references are entirely missing, you can add them using this form.