City Research Online

Abstract

It is well-known that Excess-of-Loss reinsurance has more marketability than Stop-Loss reinsurance, though Stop-Loss reinsurance is the most prominent setting discussed in the optimal (re)insurance design literature. We point out that optimal reinsurance policy under Stop-Loss leads to a zero insolvency probability, which motivates our paper. We remedy this peculiar property of the optimal Stop-Loss reinsurance contract by investigating the optimal Excess-of-Loss reinsurance contract instead. We also provide estimators for the optimal Excess-of-Loss and Stop-Loss contracts and investigate their statistical properties under many premium principle assumptions and various risk preferences, which, according to our knowledge, have never been investigated in the literature. Simulated data and real-life data are used to illustrate our main theoretical findings.

Publication Type:	Article
Additional Information:	© 2024. This manuscript version is made available under the CC-BY-NC-ND 4.0 license https://creativecommons.org/licenses/by-nc-nd/4.0/
Publisher Keywords:	Risk analysis, Optimal insurance, Nonparametric estimation
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management Q Science > QA Mathematics
Departments:	Bayes Business School Bayes Business School > Actuarial Science & Insurance
SWORD Depositor:	Symplectic Administrator

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