Premium Rates Under Inflationary Conditions

This short note has as its starting point an interesting article by Taylor in which he considered the effects of inflation on a risk process. Taylor showed that if the premium density increased at the same rate as the cost of individual claims then, under certain conditions, ultimate ruin was certain. This raised a natural question, via "If the cost of individual claims is increasing how should the premiums be increased in order to keep the probability of ruin under control?" It is this question that we shall be considering in this note. Solvency