IDEAS home Printed from
MyIDEAS: Login to save this article

The optimal reinsurance strategy -- the individual claim case

  • Centeno, M.L.
  • Guerra, M.

This paper is concerned with the optimal form of reinsurance when the cedent seeks to maximize the adjustment coefficient of the retained risk (related to the probability of ultimate ruin)-which we prove to be equivalent to maximizing the expected utility of wealth, with respect to an exponential utility with a certain coefficient of risk aversion-and restricts the reinsurance strategies to functions of the individual claims, which is the case for most nonproportional treaties placed in the market. Assuming that the premium calculation principle is a convex functional we prove the existence and uniqueness of solutions and provide a necessary optimality condition (via needle-like perturbations, widely known in optimal control). These results are used to find the optimal reinsurance policy when the reinsurance loading is increasing with the variance. The optimal contract is described by a nonlinear function, of a similar form than in the aggregate case.

If 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.

File URL:
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Insurance: Mathematics and Economics.

Volume (Year): 46 (2010)
Issue (Month): 3 (June)
Pages: 450-460

in new window

Handle: RePEc:eee:insuma:v:46:y:2010:i:3:p:450-460
Contact details of provider: Web page:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:insuma:v:46:y:2010:i:3:p:450-460. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.