AN OPTIMIZATION OF A REINSURANCE SCHEME BASED ON THE MEAN-VARIANCE PREFERENCE

• Main Author: Prakosa, Bimadanta
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/53661
• Institution: Institut Teknologi Bandung

An insurance business is a business of spreading the risk of financial losses. An insurance company needs to measure the risks its business will cover to keep profitable. One way of spreading the risks is by purchasing a reinsurance policy. The insurance company shares some of the risks to a reinsurance company and provides a compensation in the form of a reinsurance premium. In sharing parts of the risks to the reinsurance company, the insurance company needs to measure how much of the total risks the insurance company will cover, which are its own retention and the reinsurance premium it needs to pay. One methodology to determine an optimal reinsurance premium is to analyze the mean-variance of the ceded losses. The Sharpe ratio and the mean-variance utility are measurements which are often used in calculating an optimal reinsurance scheme. In this thesis, the parameters in the optimal reinsurance schemes are determined numerically. Applying different loss probability distributions, the results of the optimal reinsurance schemes are compared.