Finite-time ruin probabilities under large-claim reinsurance treaties for heavy-tailed claim sizes

DOI10.1017/JPR.2020.8MaRDI QIDQ3299447zbMATH OpenOpenAlexFDO

Authors Bohan Chen, Eleni Vatamidou, Hansjörg Albrecher, Bert Zwart

Publication date 22 July 2020

Published in Journal of Applied Probability (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1905.05527

zbMATH Keywords

heavy tailslarge deviationsfinite-time ruin probabilitiesECOMORlarge-claim reinsurance

Mathematics Subject Classification ID

Actuarial mathematics (91G05) Large deviations (60F10)

Abstract: We investigate the probability that an insurance portfolio gets ruined within a finite time period under the assumption that the r largest claims are (partly) reinsured. We show that for regularly varying claim sizes the probability of ruin after reinsurance is also regularly varying in terms of the initial capital, and derive an explicit asymptotic expression for the latter. We establish this result by leveraging recent developments on sample-path large deviations for heavy tails. Our results allow, on the asymptotic level, for an explicit comparison between two well-known large-claim reinsurance contracts, namely LCR and ECOMOR. We finally assess the accuracy of the resulting approximations using state-of-the-art rare event simulation techniques.

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Cited in

(4)

• Fourier methods for the claims amounts of largest claims reinsurance covers
• Scale-free graphs with many edges
• Multiple per-claim reinsurance based on maximizing the Lundberg exponent
• On finite-time ruin probabilities with reinsurance cycles influenced by large claims

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