Application of Reliability Theory to Insurance

There is a general rule applicable to all insurance and reinsurance fields according to which the level of the so-called technical minimum premium should be fixed such that a certain stability criterion is satisfied for the portfolio under consideration. The two best known such criteria are (i) tile probability that there is a technical loss in any of the future years should be less than a given percentage (ii) the probability that the company gets "ruined" i.e. initial reserves plus accumulated premiums minus accumulated claims becomes negative at any time of a given period in the future should be less than a tolerated percentage.