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Euler allocations in the presence of non-linear reinsurance: Comment on Major (2018)

Author

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  • Pesenti, Silvana M.
  • Tsanakas, Andreas
  • Millossovich, Pietro

Abstract

Major (2018) discusses Euler/Aumann–Shapley allocations for non-linear positively homogeneous portfolios. For such portfolio structures, plausibly arising in the context of reinsurance, he defines a distortion-type risk measure that facilitates assessment of ceded and net losses with reference to gross portfolio outcomes. Subsequently, Major (2018) derives explicit formulas for Euler allocations for this risk measure, thus (sub-)allocating ceded losses to the portfolio’s original components. In this comment, we build on Major’s (2018) insights but take a somewhat different direction, to consider Euler capital allocations for distortion risk measures directly applied to homogeneous portfolios. Explicit formulas are derived and our approach is compared with that of Major (2018) via a numerical example.

Suggested Citation

  • Pesenti, Silvana M. & Tsanakas, Andreas & Millossovich, Pietro, 2018. "Euler allocations in the presence of non-linear reinsurance: Comment on Major (2018)," Insurance: Mathematics and Economics, Elsevier, vol. 83(C), pages 29-31.
    • Handle: RePEc:eee:insuma:v:83:y:2018:i:c:p:29-31
    DOI: 10.1016/j.insmatheco.2018.09.001
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    References listed on IDEAS

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    Cited by:

    1. Akif Ince & Ilaria Peri & Silvana Pesenti, 2021. "Risk contributions of lambda quantiles," Papers 2106.14824, arXiv.org, revised Nov 2022.

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