IDEAS home Printed from https://ideas.repec.org/a/cup/astinb/v11y1980i02p119-135_00.html
   My bibliography  Save this article

The Effect of Reinsurance on the Degree of Risk Associated with an Insurer's Portfolio

Author

Listed:
  • Andreadakis, M.
  • Waters, H. R.

Abstract

There are many reasons why an insurer may choose to reinsure a part of his portfolio (see, for example, Carter (1979, p. 5 ff.)) and many ways in which he can assess the effectiveness of the reinsurance arrangements he makes. In this paper we assume the insurer wishes to reinsure a part of his portfolio in order to reduce its “riskiness”. We take as given a portfolio consisting of n independent risks together with the total premium charged to insure these risks and we investigate the effect on the degree of risk associated with the portfolio (see §3 for a definition) of varying the excess of loss or proportional reinsurance limits for each risk.We are given an insurance portfolio consisting of n independent risks. A risk may consist of a single policy or a group of policies: the essential points being that a reinsurance limit, either excess of loss or proportional, is the same for all claims arising from a particular risk, although reinsurance limits may vary from one risk to another. We assume the claims arising from each risk have a compound Poisson distribution. To be more precise, we assume the number of claims arising from the i-th risk is a Poisson process with mean Pi claims each year and the size of each claim has distribution function Fi. As usual, the size of a claim is independent of the time at which it occurs and of all other claims. We also assume that Fi(O) = O for each i, so that we consider only positive claims amounts. We take as given the total annual premium, P, charged by the insurer in respect of these risks. We make no assumption about the way in which P is calculated but we do assume that

Suggested Citation

  • Andreadakis, M. & Waters, H. R., 1980. "The Effect of Reinsurance on the Degree of Risk Associated with an Insurer's Portfolio," ASTIN Bulletin, Cambridge University Press, vol. 11(2), pages 119-135, December.
  • Handle: RePEc:cup:astinb:v:11:y:1980:i:02:p:119-135_00
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S051503610000670X/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Paulsen, Jostein, 1995. "Optimal per claim deductibility in insurance with the possibility of risky investments," Insurance: Mathematics and Economics, Elsevier, vol. 17(2), pages 133-147, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:astinb:v:11:y:1980:i:02:p:119-135_00. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/asb .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.