IDEAS home Printed from https://ideas.repec.org/a/gam/jrisks/v3y2015i2p164-182d50635.html
   My bibliography  Save this article

The Impact of Reinsurance Strategies on Capital Requirements for Premium Risk in Insurance

Author

Listed:
  • Gian Paolo Clemente

    (Department of Mathematics, Finance and Econometrics, Università Cattolica del Sacro Cuore, 20123 Milano, Italy
    These authors contributed equally to this work.)

  • Nino Savelli

    (Department of Mathematics, Finance and Econometrics, Università Cattolica del Sacro Cuore, 20123 Milano, Italy
    These authors contributed equally to this work.)

  • Diego Zappa

    (Department of Statistical Sciences, Università Cattolica del Sacro Cuore, 20123 Milano, Italy
    These authors contributed equally to this work.)

Abstract

New risk-based solvency requirements for insurance companies across European markets have been introduced by Solvency II and will come in force from 1 January 2016. These requirements, derived by a Standard Formula or an Internal Model, will be by far more risk-sensitive than the required solvency margin provided by the current legislation. In this regard, a Partial Internal Model for Premium Risk is developed here for a multi-line Non-Life insurer. We follow a classical approach based on a Collective Risk Model properly extended in order to consider not only the volatility of aggregate claim amounts but also expense volatility. To measure the effect of risk mitigation, suitable reinsurance strategies are pursued. We analyze how naïve coverage as conventional Quota Share and Excess of Loss reinsurance may modify the exact moments of the distribution of technical results. Furthermore, we investigate how alternative choices of commission rates in proportional treaties may affect the variability of distribution. Numerical results are also figured out in the last part of the paper with evidence of different effects for small and large companies. The main reasons for these differences are pointed out.

Suggested Citation

  • Gian Paolo Clemente & Nino Savelli & Diego Zappa, 2015. "The Impact of Reinsurance Strategies on Capital Requirements for Premium Risk in Insurance," Risks, MDPI, vol. 3(2), pages 1-19, June.
    • Handle: RePEc:gam:jrisks:v:3:y:2015:i:2:p:164-182:d:50635
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-9091/3/2/164/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-9091/3/2/164/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hürlimann, Werner, 2005. "Excess of Loss Reinsurance with Reinstatements Revisited," ASTIN Bulletin, Cambridge University Press, vol. 35(1), pages 211-238, May.
    2. Coutts, S.M. & Thomas, T.R.H., 1997. "Modelling the Impact of Reinsurance on Financial Strength," British Actuarial Journal, Cambridge University Press, vol. 3(3), pages 583-653, August.
    3. Centeno, Maria de Lourdes, 1995. "The Effect of the Retention Limit on the Risk Reserve," ASTIN Bulletin, Cambridge University Press, vol. 25(1), pages 67-74, May.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. Antonio Pallaria & Nino Savelli, 2019. "Premium Risk Net of Reinsurance: From Short-Term to Medium-Term Assessment," Risks, MDPI, vol. 7(3), pages 1-29, July.
    2. Gian Paolo Clemente, 2018. "The Effect of Non-Proportional Reinsurance: A Revision of Solvency II Standard Formula," Risks, MDPI, vol. 6(2), pages 1-13, May.
    3. Emilia CLIPICI, 2019. "The Risk's Transfer through Reinsurance for Non-life Insurances," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 2, pages 154-161.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gian Paolo Clemente, 2018. "The Effect of Non-Proportional Reinsurance: A Revision of Solvency II Standard Formula," Risks, MDPI, vol. 6(2), pages 1-13, May.
    2. Payandeh Najafabadi, Amir T. & Bazaz, Ali Panahi, 2016. "An optimal co-reinsurance strategy," Insurance: Mathematics and Economics, Elsevier, vol. 69(C), pages 149-155.
    3. Paola Ferretti & Antonella Campana, 2011. "XL reinsurance with reinstatements and initial premium feasibility in exchangeability hypothesis," Working Papers 2011_14, Department of Economics, University of Venice "Ca' Foscari".
    4. Shree Khare & Keven Roy, 2021. "Quantifying the Role of Occurrence Losses in Catastrophe Excess of Loss Reinsurance Pricing," Risks, MDPI, vol. 9(3), pages 1-40, March.

    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:gam:jrisks:v:3:y:2015:i:2:p:164-182:d:50635. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    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.