Optimal Insurance-Package and Investment Problem for an Insurer

Sheng Delei () and Xing Linfang
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Sheng Delei: Department of Applied Mathematics, Shanxi University of Finance and Economics, Taiyuan, 030006, China
Xing Linfang: Department of Foundational Courses, Tianjin Railway Technical and Vocational College, Tianjin, 300241, China

Journal of Systems Science and Information, 2018, vol. 6, issue 1, 85-96

Abstract: An insurance-package is a combination being tie-in at least two different categories of insurances with different underwriting-yield-rate. In this paper, the optimal insurance-package and investment problem is investigated by maximizing the insurer’s exponential utility of terminal wealth to find the optimal combination-share and investment strategy. Using the methods of stochastic analysis and stochastic optimal control, the Hamilton-Jacobi-Bellman (HJB) equations are established, the optimal strategy and the value function are obtained in closed form. By comparing with classical results, it shows that the insurance-package can enhance the utility of terminal wealth, meanwhile, reduce the insurer’s claim risk.

Keywords: insurance-package; the HJB equation; optimal combination-share; optimal strategy (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:bpj:jossai:v:6:y:2018:i:1:p:85-96:n:6

DOI: 10.21078/JSSI-2018-085-12

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