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PRICING IN REINSURANCE BARGAINING WITH COMONOTONIC ADDITIVE UTILITY FUNCTIONS

Published online by Cambridge University Press:  08 April 2016

Tim J. Boonen ,
Ken Seng Tan  and
Sheng Chao Zhuang
Tim J. Boonen
Affiliation:
Amsterdam School of Economics, University of Amsterdam, Roetersstraat 11, 1018 WB, Amsterdam, the Netherlands, E-Mail: t.j.boonen@uva.nl
Ken Seng Tan
Affiliation:
Department of Statistics and Actuarial Science, University of Waterloo, Waterloo, Ontario, N2L 3G1, Canada, E-Mail: kstan@uwaterloo.ca
Sheng Chao Zhuang*
Affiliation:
Department of Statistics and Actuarial Science, University of Waterloo, Waterloo, Ontario, N2L 3G1, Canada
*
E-Mail: s2zhuang@uwaterloo.ca
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Abstract

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Optimal reinsurance indemnities have widely been studied in the literature, yet the bargaining for optimal prices has remained relatively unexplored. Therefore, the key objective of this paper is to analyze the price of reinsurance contracts. We use a novel way to model the bargaining powers of the insurer and reinsurer, which allows us to generalize the contracts according to the Nash bargaining solution, indifference pricing and the equilibrium contracts. We illustrate these pricing functions by means of inverse-S shaped distortion functions for the insurer and the Value-at-Risk for the reinsurer.

Keywords

Reinsurance bargainingcomonotonic additivityinverse-S shaped distortion functionValue-at-risk
Type
Research Article
Information
ASTIN Bulletin: The Journal of the IAA , Volume 46 , Issue 2 , May 2016 , pp. 507 - 530
Copyright
Copyright © Astin Bulletin 2016 

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