An equilibrium model of reinsurance pricing

Jiang CHENG; Chao DENG; Shuyan LIU; Xudong ZENG

doi:10.1016/j.spl.2024.110280

An equilibrium model of reinsurance pricing

Jiang CHENG, Chao DENG, Shuyan LIU, Xudong ZENG^*

^*Corresponding author for this work

Department of Operations and Risk Management

Research output: Journal Publications › Journal Article (refereed) › peer-review

Abstract

Reinsurance is the insurance of insurance companies. We develop a dynamic equilibrium model for reinsurance pricing based on the supply and demand of reinsurance. In the model, an insurance company and a reinsurance company make decisions on the optimal reinsurance policy as a demander and a supplier of reinsurance, respectively. The reinsurance price is determined when the demand matches the supply. We incorporate the proportional reinsurance policy as well as investment opportunities into the framework. The high flexibility of this equilibrium pricing model paves a new way for studies of optimal reinsurance and reinsurance pricing.

Original language	English
Article number	110280
Journal	Statistics and Probability Letters
Volume	216
Early online date	1 Oct 2024
DOIs	https://doi.org/10.1016/j.spl.2024.110280
Publication status	E-pub ahead of print - 1 Oct 2024

Bibliographical note

Jiang Cheng acknowledges the financial support of Lingnan University, HKSAR. Chao Deng was supported by National Natural Science Foundation of China (11801099, 12171103). Shuyan Liu acknowledges the financial support of Shanghai Pujiang Program (21PJC051) and National Natural Science Foundation of China (72101140, 72073089). Xudong Zeng was supported by the MOE Project of Key Research Institute of Humanities and Social Sciences at Universities (22JJD790089).

Keywords

Dynamic programming
Equilibrium model
Optimal reinsurance
Reinsurance pricing

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10.1016/j.spl.2024.110280

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title = "An equilibrium model of reinsurance pricing",

abstract = "Reinsurance is the insurance of insurance companies. We develop a dynamic equilibrium model for reinsurance pricing based on the supply and demand of reinsurance. In the model, an insurance company and a reinsurance company make decisions on the optimal reinsurance policy as a demander and a supplier of reinsurance, respectively. The reinsurance price is determined when the demand matches the supply. We incorporate the proportional reinsurance policy as well as investment opportunities into the framework. The high flexibility of this equilibrium pricing model paves a new way for studies of optimal reinsurance and reinsurance pricing.",

keywords = "Dynamic programming, Equilibrium model, Optimal reinsurance, Reinsurance pricing",

author = "Jiang CHENG and Chao DENG and Shuyan LIU and Xudong ZENG",

note = "Jiang Cheng acknowledges the financial support of Lingnan University, HKSAR. Chao Deng was supported by National Natural Science Foundation of China (11801099, 12171103). Shuyan Liu acknowledges the financial support of Shanghai Pujiang Program (21PJC051) and National Natural Science Foundation of China (72101140, 72073089). Xudong Zeng was supported by the MOE Project of Key Research Institute of Humanities and Social Sciences at Universities (22JJD790089).",

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AU - LIU, Shuyan

AU - ZENG, Xudong

N1 - Jiang Cheng acknowledges the financial support of Lingnan University, HKSAR. Chao Deng was supported by National Natural Science Foundation of China (11801099, 12171103). Shuyan Liu acknowledges the financial support of Shanghai Pujiang Program (21PJC051) and National Natural Science Foundation of China (72101140, 72073089). Xudong Zeng was supported by the MOE Project of Key Research Institute of Humanities and Social Sciences at Universities (22JJD790089).

PY - 2024/10/1

Y1 - 2024/10/1

N2 - Reinsurance is the insurance of insurance companies. We develop a dynamic equilibrium model for reinsurance pricing based on the supply and demand of reinsurance. In the model, an insurance company and a reinsurance company make decisions on the optimal reinsurance policy as a demander and a supplier of reinsurance, respectively. The reinsurance price is determined when the demand matches the supply. We incorporate the proportional reinsurance policy as well as investment opportunities into the framework. The high flexibility of this equilibrium pricing model paves a new way for studies of optimal reinsurance and reinsurance pricing.

AB - Reinsurance is the insurance of insurance companies. We develop a dynamic equilibrium model for reinsurance pricing based on the supply and demand of reinsurance. In the model, an insurance company and a reinsurance company make decisions on the optimal reinsurance policy as a demander and a supplier of reinsurance, respectively. The reinsurance price is determined when the demand matches the supply. We incorporate the proportional reinsurance policy as well as investment opportunities into the framework. The high flexibility of this equilibrium pricing model paves a new way for studies of optimal reinsurance and reinsurance pricing.

KW - Dynamic programming

KW - Equilibrium model

KW - Optimal reinsurance

KW - Reinsurance pricing

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U2 - 10.1016/j.spl.2024.110280

DO - 10.1016/j.spl.2024.110280

M3 - Journal Article (refereed)

SN - 0167-7152

VL - 216

JO - Statistics and Probability Letters

JF - Statistics and Probability Letters

M1 - 110280

ER -

An equilibrium model of reinsurance pricing

Abstract

Bibliographical note

Keywords

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