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Pareto-optimal reinsurance arrangements under general model settings

Author

Listed:
  • Cai, Jun
  • Liu, Haiyan
  • Wang, Ruodu

Abstract

In this paper, we study Pareto optimality of reinsurance arrangements under general model settings. We give the necessary and sufficient conditions for a reinsurance contract to be Pareto-optimal and characterize all Pareto-optimal reinsurance contracts under more general model assumptions. We also obtain the sufficient conditions that guarantee the existence of the Pareto-optimal reinsurance contracts. When the losses of an insurer and a reinsurer are both measured by the Tail-Value-at-Risk (TVaR) risk measures, we obtain the explicit forms of the Pareto-optimal reinsurance contracts under the expected value premium principle. For the purpose of practice, we use numerical examples to show how to determine the mutually acceptable Pareto-optimal reinsurance contracts among the available Pareto-optimal reinsurance contracts such that both the insurer’s aim and the reinsurer’s goal can be met under the mutually acceptable Pareto-optimal reinsurance contracts.

Suggested Citation

  • Cai, Jun & Liu, Haiyan & Wang, Ruodu, 2017. "Pareto-optimal reinsurance arrangements under general model settings," Insurance: Mathematics and Economics, Elsevier, vol. 77(C), pages 24-37.
    • Handle: RePEc:eee:insuma:v:77:y:2017:i:c:p:24-37
    DOI: 10.1016/j.insmatheco.2017.08.004
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    References listed on IDEAS

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    JEL classification:

    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games

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