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Optimal reinsurance with premium constraint under distortion risk measures

Listed author(s):
  • Zheng, Yanting
  • Cui, Wei
Registered author(s):

    Recently distortion risk measure has been an interesting tool for the insurer to reflect its attitude toward risk when forming the optimal reinsurance strategy. Under the distortion risk measure, this paper discusses the reinsurance design with unbinding premium constraint and the ceded loss function in a general feasible region which requiring the retained loss function to be increasing and left-continuous. Explicit solution of the optimal reinsurance strategy is obtained by introducing a premium-adjustment function. Our result has the form of layer reinsurance with the mixture of normal reinsurance strategies in each layer. Finally, to illustrate the applicability of our results, we derive the optimal reinsurance solutions with premium constraint under two special distortion risk measures—VaR and TVaR.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0167668714001140
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    Article provided by Elsevier in its journal Insurance: Mathematics and Economics.

    Volume (Year): 59 (2014)
    Issue (Month): C ()
    Pages: 109-120

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    Handle: RePEc:eee:insuma:v:59:y:2014:i:c:p:109-120
    DOI: 10.1016/j.insmatheco.2014.08.010
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505554

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