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Optimal Reinsurance Strategy Based on the Lundberg Exponent

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Abstract

In this paper, the authors investigate the optimal per-claim reinsurance problem under the continuous-time framework to minimize the insurer’s ruin probability based on the Lundberg exponent. Considering reinsurance participants’ diversified risk preferences, the authors assume that the reinsurance premium is calculated by a combined premium principle, including the expected value premium principle and upper moment premium principle. Then, the authors derive the insurer’s optimal reinsurance strategy satisfying the principle of indemnity and the incentive compatibility condition in an infinite reinsurance space based on the point-wise optimization approach. Besides, the proposed work emphasizes the optimality and admissibility of the combination of the excess of loss reinsurance and its dual form when a piecewise reinsurance premium principle is considered. As a special case, the optimal reinsurance strategy under the expected value premium principle reduces to the classic result. Furthermore, the numerical analyses are provided to illustrate the effects of the main parameters on the maximal Lundberg exponent and the optimal reinsurance strategy.

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Authors and Affiliations

  1. School of Insurance, Central University of Finance and Economics, Bei**g, 100081, China

    Yeshunying Wang

  2. China Institute for Actuarial Science, Central University of Finance and Economics, Bei**g, 100081, China

    Hui Meng & Pu Liao

Authors
  1. Yeshunying Wang
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  2. Hui Meng
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  3. Pu Liao
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Corresponding author

Correspondence to Yeshunying Wang.

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The authors declare no conflict of interest.

Additional information

This research was supported by the National Natural Science Foundation of China under Grant Nos. 12071498 and 12371478, the Program for Innovation Research in Central University of Finance and Economics and Innovation Introduction Base for Insurance Risk Analysis and Decision Making Discipline under Grant No. B17050.

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Cite this article

Wang, Y., Meng, H. & Liao, P. Optimal Reinsurance Strategy Based on the Lundberg Exponent. J Syst Sci Complex (2024). https://doi.org/10.1007/s11424-024-3199-8

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  • DOI: https://doi.org/10.1007/s11424-024-3199-8

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