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Optimal non-life reinsurance under Solvency II Regime

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  • Asimit, Alexandru V.
  • Chi, Yichun
  • Hu, Junlei

Abstract

The optimal reinsurance contract is investigated from the perspective of an insurer who would like to minimise its risk exposure under Solvency II. Under this regulatory framework, the insurer is exposed to the retained risk, reinsurance premium and change in the risk margin requirement as a result of reinsurance. Depending on how the risk margin corresponding to the reserve risk is calculated, two optimal reinsurance problems are formulated. We show that the optimal reinsurance policy can be in the form of two layers. Further, numerical examples illustrate that the optimal two-layer reinsurance contracts are only slightly different under these two methodologies.

Suggested Citation

  • Asimit, Alexandru V. & Chi, Yichun & Hu, Junlei, 2015. "Optimal non-life reinsurance under Solvency II Regime," Insurance: Mathematics and Economics, Elsevier, vol. 65(C), pages 227-237.
    • Handle: RePEc:eee:insuma:v:65:y:2015:i:c:p:227-237
    DOI: 10.1016/j.insmatheco.2015.09.006
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    2. Y. Bai & E. Hashorva & G. Ratovomirija & M. Tamraz, 2016. "Some Mathematical Aspects of Price Optimisation," Papers 1605.05814, arXiv.org.
    3. Nanjun ZHU & Yulin FENG, 2017. "Optimal Change-Loss Reinsurance Contract Design under Tail Risk Measures for Catastrophe Insurance," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 51(4), pages 225-242.
    4. Barry Sheehan & Christian Humberg & Darren Shannon & Michael Fortmann & Stefan Materne, 2023. "Diversification and Solvency II: the capital effect of portfolio swaps on non-life insurers," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 48(4), pages 872-905, October.
    5. Asimit, Alexandru V. & Hu, Junlei & Xie, Yuantao, 2019. "Optimal robust insurance with a finite uncertainty set," Insurance: Mathematics and Economics, Elsevier, vol. 87(C), pages 67-81.
    6. Moccia, Luigi & Laporte, Gilbert, 2016. "Improved models for technology choice in a transit corridor with fixed demand," Transportation Research Part B: Methodological, Elsevier, vol. 83(C), pages 245-270.

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