Journal Article

Optimal combination of quota-share and stop-loss reinsurance treaties under the joint survival probability

Ying Fang and Zhongfeng Qu

in IMA Journal of Management Mathematics

Published on behalf of Institute of Mathematics and its Applications

Volume 25, issue 1, pages 89-103
Published in print January 2014 | ISSN: 1471-678X
Published online November 2012 | e-ISSN: 1471-6798 | DOI: http://dx.doi.org/10.1093/imaman/dps029
Optimal combination of quota-share and stop-loss reinsurance treaties under the joint survival probability

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A reinsurance contract involves two parties: an insurer and a reinsurer. Most existing optimal reinsurance treaties consider only the interest of one party. In this paper, we consider the interests of both the insurer and reinsurer and derive the optimal reinsurance contract in the form of the combination of quota-share and stop-loss reinsurance under the optimization criteria that maximize the joint survival probability. We first study the joint survival probability of insurers and reinsurers. We then derive conditions for the existence of the optimal reinsurance retentions and determine the optimal retentions that maximize the joint survival probability under expected value reinsurance premium principle.

Keywords: combination of quota-share and stop-loss reinsurance; expected value principle; reinsurance retention; joint survival probability

Journal Article.  0 words. 

Subjects: Mathematics

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