The Effect of the Retention Limit on the Risk Reserve

This paper is devoted to the study of the initial reserve, as a function of the retention limit needed to assure that the probability of ruin, at the end of a certain period of time, is not higher than an agreed value, for an excess of loss treaty To assess the probability of ruin, the normal and the normal power approximation are used. It is shown that the initial reserve is not in general an increasing function of the retention, having a minimum under fair assumptions. Keywords: Risk reserve- excess of loss; normal power approximation, normal approximation