Chains of Reinsurance Revisited

Jean Lemaire and Jean-Pierre Quairiere

ASTIN Bulletin, 1986, vol. 16, issue 2, 77-88

Abstract: Chains of reinsurance were first modelled by Gerber, in a special case. It is shown that more general results can be obtained by applying Borch's theorem. The Pareto-optimal reinsurance indemnities are uniquely determined using the only assumption that the participating companies use exponential utility functions. A simple comparison then shows that Gerber's indemnities are not Pareto-optimal. Even if no assumption at all is introduced, the indemnities are shown to be closely linked to the risk aversions of the participants.

Date: 1986
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