Optimal Premium Plans for Reinsurance with Reinstatements

Klaus TH. Hess and Klaus D. Schmidt

ASTIN Bulletin, 2004, vol. 34, issue 2, 299-313

Abstract: The present paper is concerned with optimal premium plans for a reinsurance contract with reinstatements. In the reinsurance contract considered here, constant reinstatement premiums are due when the reinsurer’s loss exceeds certain bounds. For this reinsurance contract we examine the existence of a premium plan which minimizes the expected squared difference between the loss and the total premium income of the reinsurer. We show that an optimal premium plan exists, that it is unique, and that it satisfies the net premium principle.

Date: 2004
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