A Single Period Model for Optimal Underwriting Profit
This paper presents an optimization model for maximizing the insurer’s underwriting profits in any particular line of insurance at a point in time. We propose the use of mathematical programming to maximize underwriting profits when the objective function is expressed as a nonlinear convex function subject to linear inequality constraints. The constraints are imposed on premiums, loss payments and resources allocated for underwriting and loss adjustment activities. Although basic global solution is not guaranteed, under a set of sufficient conditions global basic solution is identified. An alternative basic solution is obtained where maximization is done over an expression which contains both the expected value as well as the variance of profits. Several nonlinear algorithms are outlined for possible solutions.
Volume (Year): 18 (1995)
Issue (Month): 2 ()
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