A financially Balanced Bonus/Malus System

Geert Coene and Louis G. Doray

ASTIN Bulletin, 1996, vol. 26, issue 1, 107-116

Abstract: The premiums for a bonus-malus system which stays in financial equilibrium over the years are calculated. This is done by minimizing a quadratic function of the difference between the premium for an optimal BMS with an infinite number of classes and the premium for a BMS with a finite number of classes, weighted by the stationary probability of being in a certain class, and by imposing various constraints on the system.

Date: 1996
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