Decision Analysis Models in Reinsurance
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.
Decision theory, insurance, reinsurance, utility functions
Business | Insurance | Strategic Management Policy
Strategy and Organisation
European Journal of Operational Research
SAMSON, Danny and THOMAS, Howard.
Decision Analysis Models in Reinsurance. (1985). European Journal of Operational Research. 19, (2), 201-211. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/3869