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Comparing Risk Adjusted Premiums from the Reinsurance Point of View

Published online by Cambridge University Press:  29 August 2014

João Manuel Andrade e Silva  and
Maria de Lourdes Centeno
João Manuel Andrade e Silva*
Affiliation:
ISEG, Technical University of Lisbon, Portugal
Maria de Lourdes Centeno
Affiliation:
ISEG, Technical University of Lisbon, Portugal
*
Instituto Superior de Economia e Gestão, Rua do Quelhas, 6, 1200 Lisboa, Portugal, email:[email protected]
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Abstract

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In this paper we compare, from the point of view of reinsurance, the several risk adjusted premium calculation principles considered in Wang (1996b). We conclude that, with the exception of the proportional hazard (PH) premium calculation principle, all the others behave in a way similar to the expected value principle. We prove that the stop loss reinsurance premium when calculated using the PH premium principle gives a higher premium than any of the other transforms, provided that the priority is big enough. We observe a similar behaviour with respect to excess of loss reinsurance in all the examples given.

We also study the behaviour of the adjustment coefficient, both from the insurer's and the reinsurer's point of view as functions of the priority, when the PH principle is used as opposed to the expected value principle.

Keywords

PH-transformrisk adjusted premiumreinsuranceadjustment coefficient
Type
Articles
Information
ASTIN Bulletin: The Journal of the IAA , Volume 28 , Issue 2 , November 1998 , pp. 221 - 239
Copyright
Copyright © International Actuarial Association 1998

References

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