Reinsurance of multiple risks with generic dependence structures

M. Guerra and A. B. de Moura

No 2020/0149, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: We consider the optimal reinsurance problem from the point of view of a direct insurerowning several dependent risks, assuming a maximal expected utility criterion and inde-pendent negotiation of reinsurance for each risk. Without any particular hypothesis onthe dependency structure, we show that optimal treaties exist in a class of independent randomized contracts. We derive optimality conditions and show that under mild assumptions the optimal contracts are of classical (non-randomized) type. A specific form of the optimality conditions applies in that case. We illustrate the results with some numerical examples.

Keywords: Reinsurance; Dependent Risks; Premium Calculation Principles; Expected Utility; Randomized reinsurance treaties (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-upt
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