Optimal reinsurance under risk and uncertainty

Alejandro Balbás, Beatriz Balbás, Raquel Balbás and Antonio Heras

Insurance: Mathematics and Economics, 2015, vol. 60, issue C, 61-74

Abstract: This paper deals with the optimal reinsurance problem if both insurer and reinsurer are facing risk and uncertainty, though the classical uncertainty free case is also included. The insurer and reinsurer degrees of uncertainty do not have to be identical. The decision variable is not the retained (or ceded) risk, but its sensitivity with respect to the total claims. Thus, if one imposes strictly positive lower bounds for this variable, the reinsurer moral hazard is totally eliminated.

Keywords: Risk and uncertainty; Moral hazard; Optimal reinsurance and optimality conditions; Bang–bang solution; The optimal reinsurance linear problem (search for similar items in EconPapers)
JEL-codes: G22 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:60:y:2015:i:c:p:61-74

DOI: 10.1016/j.insmatheco.2014.11.001

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