Optimal non-life reinsurance under Solvency II Regime

Asimit, A.V., Chi, Y. & Hu, J. (2015). Optimal non-life reinsurance under Solvency II Regime. Insurance: Mathematics and Economics, 65, pp. 627-637. doi: 10.1016/j.insmatheco.2015.09.006

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Abstract

The optimal reinsurance contract is investigated from the perspective of an insurer who would like to minimise its risk exposure under Solvency II. Under this regulatory framework, the insurer is exposed to the retained risk, reinsurance premium and change in the risk margin requirement as a result of reinsurance. Depending on how the risk margin corresponding to the reserve risk is calculated, two optimal reinsurance problems are formulated. We show that the optimal reinsurance policy can be in the form of two layers. Further, numerical examples illustrate that the optimal two-layer reinsurance contracts are only slightly different under these two methodologies.

Item Type: Article
Additional Information: © 2015, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
Uncontrolled Keywords: Optimal reinsurance; Risk margin; General premium principle; Solvency II; Technical provision
Subjects: H Social Sciences > HG Finance
Divisions: Cass Business School > Faculty of Actuarial Science & Insurance
Related URLs:
URI: http://openaccess.city.ac.uk/id/eprint/13145

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