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Reinsurance of multiple risks with generic dependence structures

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  • M. Guerra
  • A. B. de Moura

Abstract

We consider the optimal reinsurance problem from the point of view of a direct insurerowning several dependent risks, assuming a maximal expected utility criterion and inde-pendent negotiation of reinsurance for each risk. Without any particular hypothesis onthe dependency structure, we show that optimal treaties exist in a class of independent randomized contracts. We derive optimality conditions and show that under mild assumptions the optimal contracts are of classical (non-randomized) type. A specific form of the optimality conditions applies in that case. We illustrate the results with some numerical examples.

Suggested Citation

  • M. Guerra & A. B. de Moura, 2020. "Reinsurance of multiple risks with generic dependence structures," Working Papers REM 2020/0149, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    • Handle: RePEc:ise:remwps:wp01492020
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    File URL: https://rem.rc.iseg.ulisboa.pt/wps/pdf/REM_WP_0149_2020.pdf
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    References listed on IDEAS

    as
    1. Albrecher, Hansjörg & Cani, Arian, 2019. "On randomized reinsurance contracts," Insurance: Mathematics and Economics, Elsevier, vol. 84(C), pages 67-78.
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    More about this item

    Keywords

    Reinsurance; Dependent Risks; Premium Calculation Principles; Expected Utility; Randomized reinsurance treaties;
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