Faculty of Actuarial Science and Insurance Seminar with Tim Boonen

Optimal reinsurance with multiple reinsurers: the effect of competition and cooperation

Abstract:
In this talk, I will study optimal reinsurance contract design. Consider a setting where an insurer  bargains with reinsurers to transfer part of its risk.  In particular, I characterize  the set of Pareto optimal insurance contracts,  the core of a cooperative insurance game, and the competitive premiums. The insurance agents are endowed with  very general translation invariant preferences. The Pareto optimal contracts are shown to determine the shape of the indemnities, which can be found via closed-form or numerical solutions.  Determining associated premiums with any given optimal Pareto contract is another problem for which economic-based arguments are further discussed. I hereby focus on competitive premiums, and premiums that are in the core of an appropriate cooperative game. Finally, I will also explain how one may link the recent fast growing literature on risk-based optimality criteria to the Pareto optimality criterion, and show that the latter is much more general than the former one. 

This talk is based on joint work with Vali Asimit (Cass business school) and on joint work with Ken Seng Tan (University of Waterloo) and Shengchao Zhuang (University of Nebraska-Lincoln).

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