Catastrophe Reinsurance Pricing -Modification of Dynamic Asset-Liability Management

Han-Bin Kang (), Hsuling Chang () and Tsangyao Chang ()
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Han-Bin Kang: Qingdao University, School of Economics, Qingdao, Shandong, China
Hsuling Chang: Ling Tung University, Department of Accounting, Taichung, Taiwan
Tsangyao Chang: Feng Chia University, Department of Finance, Taichung, Taiwan

Journal for Economic Forecasting, 2022, issue 4, 5-20

Abstract: This study emphasizes the catastrophic reinsurance pricing and its sensitivity based on the asset-liability management (ALM) model. For this purpose, the instantaneous interest rate elastic stochastic ALM model of asset liability valuation is modified. Further, taking the earthquake disaster loss in China as an example, the rates of the catastrophe reinsurance are simulated by Monte Carlo method and the sensitivities of asset liability ratio, trigger level, debt structure and basis risk of the catastrophe reinsurance pricing are studied. This paper provides a validation study on the modification of the ALM model, and a quantitative reference regarding the rates of catastrophe reinsurance for the reinsurance company to deal with huge catastrophe losses such as earthquake or hurricane.

Keywords: catastrophe reinsurance; catastrophe bonds; asset-liability management; Monte-Carlo simulation (search for similar items in EconPapers)
JEL-codes: C1 C4 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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