A state dependent reinsurance model

O.J. Boxma, E. Frostig, D. Perry, R. Yosef

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Abstract

We consider the surplus of an insurance company that employs reinsurance. The reinsurer covers part of the claims, but in return it receives a certain part of the income from premiums of the insurance company. In addition, the reinsurer receives some of the dividends that are withdrawn when a certain surplus level b is reached. A special feature of our model is that both the fraction of the premium that goes to the reinsurer and the fraction of the claims covered by the reinsurer are state-dependent. We focus on five performance measures, viz., time to ruin, deficit at ruin, the dividend withdrawn until ruin, and the amount of money transferred to the reinsurer, respectively covered by the reinsurer.

Original languageEnglish
Pages (from-to)170-181
Number of pages12
JournalInsurance: Mathematics and Economics
Volume74
Issue numberMay 2017
DOIs
Publication statusPublished - 1 May 2017

Keywords

  • Deficit at ruin
  • Dividend
  • Reinsurance
  • State dependence
  • Time to ruin

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