Title

Decision Analysis Models in Reinsurance

Publication Type

Journal Article

Publication Date

2-1985

Abstract

Decision analysis models are developed and illustrated for the reinsurance (risk transfer) decisions made by insurance companies. Decision analytic models were found to be useful tools both for structuring multistage reinsurance decisions and for comparing alternative options. The insurer is faced with many possible choices involving reinsurance type and extent, and an expected utility model provided insight both as a screening device and as an evaluation criterion. Decision analytic models appeared to be superior to other approaches such as mean/variance and risk of ruin models both because of their flexibility and their more comprehensive treatment the important elements of the decision, namely the complete claims distribution, the cost of reinsurance and the insurer's risk attitude.

Keywords

Decision theory, insurance, reinsurance, utility functions

Discipline

Business | Insurance | Strategic Management Policy

Research Areas

Strategy and Organisation

Publication

European Journal of Operational Research

Volume

19

Issue

2

First Page

201

Last Page

211

ISSN

0377-2217

Identifier

10.1016/0377-2217(85)90173-0

Publisher

Elsevier

Additional URL

http://dx.doi.org/10.1016/0377-2217(85)90173-0