Abstract
This paper deals with the numberical computation of the optimal form of reinsurance from the ceding company point of view, when the cedent seeks to maximize the adjustment coefficient of the retained risk and the reinsurance loading is an increasing function of the variance.
We compare the optimal treaty with the best stop loss policy. The optimal arrangement can provide a significant improvement in the adjustment coefficient when compared to the best stop loss treaty. Further, it is substantially more robust with respect to choice of the retention level than stop-loss treaties.
Keywords: Adjustment coefficient; optimal reinsurance; stop loss; standard deviation premium principle; variance premium principle.
Volume
Vol. 40, No. 2
Page
1-25
Year
2010
Categories
Business Areas
Reinsurance
Aggregate Excess/Stop Loss
Financial and Statistical Methods
Risk Pricing and Risk Evaluation Models
Covariance Methods
Publications
ASTIN Bulletin
