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The Optimal Reinsurance Strategy under Conditional Tail Expectation (CTE) and Wang’s Premium Principle

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  • Shaoyong Hu
  • Xingguo Hu
  • Jun Hu

Abstract

In this study, we take the conditional tail expectation (CTE) as the constraint condition and consider the optimal reinsurance issues under Wang’s premium principle in general insurance contracts. With the confidence level and the distortion function in Wang’s premium principle given by the insurer in advance, a threshold can be obtained. When the insurer’s risk tolerance level is greater than this value, the optimal reinsurance is a proportional reinsurance in which the deductible equals to this value, else the optimal form of reinsurance is a stop-loss reinsurance. Corresponding numerical examples and economic explanations are also given.

Suggested Citation

  • Shaoyong Hu & Xingguo Hu & Jun Hu, 2021. "The Optimal Reinsurance Strategy under Conditional Tail Expectation (CTE) and Wang’s Premium Principle," Mathematical Problems in Engineering, Hindawi, vol. 2021, pages 1-6, May.
    • Handle: RePEc:hin:jnlmpe:5986045
    DOI: 10.1155/2021/5986045
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    Cited by:

    1. Viktorija Skvarciany & Indrė Lapinskaitė, 2022. "Designing of Optimal Reinsurance Indemnity," Mathematics, MDPI, vol. 10(19), pages 1-8, October.

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