On the flexibility and loading maximization for weighted premiums

Georgios Psarrakos and Polyxeni Vliora

Applied Mathematics and Computation, 2024, vol. 481, issue C

Abstract: The premium principle is a rule of pricing that adjusts premium with insurance risk and is the core of stating actuary insurance. This paper deals with a class of weighted premium principles that uses a positive parameter to add flexibility for an actuary to control the degree of risk aversion, and complements the study of flexibility on the modified variance premium initiated in Goovaerts et al. [9]. We apply our approach for some well-known premium principles, studying some theoretical properties, and we establish the nonmonotonic unimodal premium principles with respect to the loading parameter. Therefore, we obtain a loading maximization of weighted premiums, a useful tool to feasible contracts. We illustrate the results by some numerical examples.

Keywords: Weighted premiums; Modified variance premium; Esscher premium; Kamps premium; Value-at-Risk; Conditional tail expectation; Loading maximization; Feasible contract (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:apmaco:v:481:y:2024:i:c:s0096300324004053

DOI: 10.1016/j.amc.2024.128944

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