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Reinsurance Contracts (reinsurance + contract)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

An Extension of Arrow's Result on Optimal Reinsurance Contract

JOURNAL OF RISK AND INSURANCE, Issue 2 2008
Marek Kaluszka
We consider the problem of finding reinsurance policies that maximize the expected utility, the stability and the survival probability of the cedent for a fixed reinsurance premium calculated according to the maximal possible claims principle. We show that the limited stop loss and the truncated stop loss are the optimal contracts. [source]

Pricing Reinsurance Contracts on FDIC Losses

FINANCIAL MARKETS, INSTITUTIONS & INSTRUMENTS, Issue 3 2008
Dilip B. Madan
This paper proposes a pricing model for the FDIC's reinsurance risk. We derive a closed-form Weibull call option pricing model to price a call-spread a reinsurer might sell to the FDIC. To obtain the risk-neutral loss-density necessary to price this call spread we risk-neutralize a Weibull distributed FDIC annual losses by a tilting coefficient estimated from the traded call options on the BKX index. An application of the proposed approach yield reasonable reinsurance prices. [source]

Pricing Double-Trigger Reinsurance Contracts: Financial Versus Actuarial Approach

JOURNAL OF RISK AND INSURANCE, Issue 4 2002
Helmut Gründl
This article discusses various approaches to pricing double-trigger reinsurance contracts,a new type of contract that has emerged in the area of ,,alternative risk transfer.'' The potential coverage from this type of contract depends on both underwriting and financial risk. We determine the reinsurer's reservation price if it wants to retain the firm's same safety level after signing the contract, in which case the contract typically must be backed by large amounts of equity capital (if equity capital is the risk management measure to be taken). We contrast the financial insurance pricing models with an actuarial pricing model that has as its objective no lessening of the reinsurance company's expected profits and no worsening of its safety level. We show that actuarial pricing can lead the reinsurer into a trap that results in the failure to close reinsurance contracts that would have a positive net present value because typical actuarial pricing dictates the type of risk management measure that must be taken, namely, the insertion of additional capital. Additionally, this type of pricing structure forces the reinsurance buyer to provide this safety capital as a debtholder. Finally, we discuss conditions leading to a market for double-trigger reinsurance contracts. [source]