OPTIMIZATION OF SOME REINSURANCE STRATEGIES

O. A. Kozhukhivska, P. I. Bidyuk, V. F. Kudriachov, A. D. Kozhukhivsky

Abstract


The basic purpose of the work is a study of existing approaches to reinsurance directed towards modeling of distribution and minimization of risk for an insurance portfolio, and forming a strategy for its optimal reinsurance using developed decision support system. A method for a search of optimal reinsurance strategy is proposed. For this purpose statistical models were selected that correspond to the structure and volume of portfolio losses as well as the number of these losses. The simulation model for the total insurance losses is developed. While finding an optimal reinsurance strategy it was taken into consideration the dependence of the load coefficient on a specific form of reinsurance. A numerical study of the dependence between optimal reinsurance strategy and the varying load coefficient has been performed. It was established that taking into consideration of the variable load coefficient for specific risk capital values for an insurance company the stop-loss strategy provides worse results than other forms considered. An architecture and the functional layout for decision support system are proposed, and appropriate software was developed in C#. The decision support system functioning has been illustrated on simulated example. The system will provide a useful instrument for a business analytic to support decision making while selecting a strategy for insurance portfolio in specific conditions.


Keywords


modeling in reinsurance, optimization of reinsurance, load coefficient, decision support system, choice of reinsurance strategy.

References


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DOI: http://dx.doi.org/10.15588/1607-3274-2014-2-9



Copyright (c) 2015 O. A. Kozhukhivska, P. I. Bidyuk, V. F. Kudriachov, A. D. Kozhukhivsky

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