Optimal Reinsurance Under General Law-Invariant Convex Risk Measure and TVaR Premium Principle

Mi Chen, Wenyuan Wang and Ruixing Ming
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Mi Chen: School of Mathematics and Computer Science & FJKLMAA, Fujian Normal University, Fuzhou 350108, China
Wenyuan Wang: School of Mathematical Sciences, Xiamen University, Xiamen 361005, Fujian, China
Ruixing Ming: School of Statistics and Mathematics, ZheJiang GongShang University, Hangzhou 310018, China

Risks, 2016, vol. 4, issue 4, 1-12

Abstract: In this paper, we study the optimal reinsurance problem where risks of the insurer are measured by general law-invariant risk measures and premiums are calculated under the TVaR premium principle, which extends the work of the expected premium principle. Our objective is to characterize the optimal reinsurance strategy which minimizes the insurer’s risk measure of its total loss. Our calculations show that the optimal reinsurance strategy is of the multi-layer form, i.e., f * ( x ) = x ? c * + ( x - d * ) + with c * and d * being constants such that 0 ? c * ? d * .

Keywords: reinsurance; general law-invariant risk measure; TVaR premium principle (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2016
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