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Relative Reinsurance Retention Levels

Author

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  • Dickson, David C.M.
  • Waters, Howard R.

Abstract

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.

Suggested Citation

  • Dickson, David C.M. & Waters, Howard R., 1997. "Relative Reinsurance Retention Levels," ASTIN Bulletin, Cambridge University Press, vol. 27(2), pages 207-227, November.
    • Handle: RePEc:cup:astinb:v:27:y:1997:i:02:p:207-227_01
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    Cited by:

    1. P. Kaelo & M. M. Ali, 2012. "Numerical Studies Of Some Generalized Controlled Random Search Algorithms," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 29(02), pages 1-24.
    2. Başak Bulut Karageyik & Şule Şahin, 2017. "Determination of the Optimal Retention Level Based on Different Measures," JRFM, MDPI, vol. 10(1), pages 1-21, January.
    3. Kaishev, Vladimir K. & Dimitrova, Dimitrina S., 2006. "Excess of loss reinsurance under joint survival optimality," Insurance: Mathematics and Economics, Elsevier, vol. 39(3), pages 376-389, December.
    4. Jong-Hag Jang, 2018. "An Empirical Analysis of the Property Catastrophe Reinsurance," International Business Research, Canadian Center of Science and Education, vol. 11(1), pages 170-183, January.
    5. Cerqueti, Roy & Foschi, Rachele & Spizzichino, Fabio, 2009. "A spatial mixed Poisson framework for combination of excess-of-loss and proportional reinsurance contracts," Insurance: Mathematics and Economics, Elsevier, vol. 45(1), pages 59-64, August.
    6. Başak Bulut Karageyik & Şule Şahin, 2016. "Optimal Retention Level for Infinite Time Horizons under MADM," Risks, MDPI, vol. 5(1), pages 1-24, December.

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