This article constructs two classes of appropriate reinsurance contracts from both an insurer’s and a reinsurer’s viewpoints. The first class, say C; has been constructed by minimizing the conditional tail expectation, say CTE, of an insurer’s random risk. Then an optimal reinsurance contract has been obtained by estimating the reinsurance’s random risk, using the Bayesian estimation method while the second class of reinsurance contracts, say C*; is obtained by minimizing a convex combination of the CTE of both the insurer’s and reinsurer’s random risks. These two approaches consider both the insurer’s and reinsurer’s viewpoints to establish an optimal reinsurance contract. A simulation study has been conducted to show practical implementation of our results.
Bazaz, Ali P. and Payandeh Najafabadi, Amir T.
An Optimal Reinsurance Contract from Insurer's and Reinsurer's Viewpoints,
Applications and Applied Mathematics: An International Journal (AAM), Vol. 10,
2, Article 22.
Available at: https://digitalcommons.pvamu.edu/aam/vol10/iss2/22