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Reinsurance of multiple risks with generic dependence structures

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  • Guerra, M.
  • de Moura, A.B.

Abstract

We consider the optimal reinsurance problem from the point of view of a direct insurer owning several dependent risks, assuming a maximal expected utility criterion, and the independent negotiation of reinsurance for each risk. Without any particular hypothesis on the dependency structure, we show that optimal treaties exist in a class of independent randomized contracts. We derive optimality conditions and show that under mild assumptions, the optimal contracts are of a classical (non-randomized) type. A specific form of the optimality conditions applies in that case. We present a numerical scheme to solve the optimality conditions.

Suggested Citation

  • Guerra, M. & de Moura, A.B., 2021. "Reinsurance of multiple risks with generic dependence structures," Insurance: Mathematics and Economics, Elsevier, vol. 101(PB), pages 547-571.
    • Handle: RePEc:eee:insuma:v:101:y:2021:i:pb:p:547-571
    DOI: 10.1016/j.insmatheco.2021.09.006
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    References listed on IDEAS

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    More about this item

    Keywords

    Reinsurance; Dependent risks; Premium calculation principles; Expected utility; Randomized reinsurance treaties;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools

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