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Truncated Stop Loss as Optimal Reinsurance Agreement in One-period Models

Published online by Cambridge University Press:  17 April 2015

Marek Kaluszka
Marek Kaluszka*
Affiliation:
Institute of Mathematics, Technical University of Lodz, UL. Zwirki 36, 90-924 Lodz – Poland, E-mail: kaluszka@p.lodz.pl
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Abstract

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We consider several one-period reinsurance models and derive a rule which minimizes the ruin probability of the cedent for a fixed reinsurance risk premium. The premium is calculated according to the economic principle, generalized zero-utility principle, Esscher principle or mean-variance principles. It turns out that a truncated stop loss is an optimal treaty in the class of all reinsurance contracts. The result is also valid for models not involving ruin probability. An example is the Arrow model with the Kahneman-Tversky value function.

Keywords

Reinsuranceinsurancestop losstruncated stop lossruinoptimal contractsKahneman-Tversky value functionruin probability
Type
Articles
Information
ASTIN Bulletin: The Journal of the IAA , Volume 35 , Issue 2 , November 2005 , pp. 337 - 349
Copyright
Copyright © ASTIN Bulletin 2005

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