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Optimal Risk Control under Excess of Loss Reinsurance

Mohamed Mnif 1 Agnès Sulem 1
1 MATHFI - Financial mathematics
Inria Paris-Rocquencourt, ENPC - École des Ponts ParisTech, UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12
Abstract : We study the optimal reinsurance policy of an insurance company which gives part of its premium stream to another compagny in exchange of an obligation to support the difference between the amount of the claim and some retention level. This contract is known as excess of loss reinsurance. The objective of the insurance compagny is to maximize the expected utility of its reserve at some planning horizon and under a nonnegativity constraint. We suppose that reinsurance incurs a cost proportional to the size of risk run by the reinsurance compagny. We first prove existence and uniqueness results for this optimization problem by using stochastic control methods. In a second part, we solve the associated Bellman equation numerically by using an algorithm based on policy iterations.
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Submitted on : Tuesday, May 23, 2006 - 8:16:17 PM
Last modification on : Wednesday, September 4, 2019 - 1:52:07 PM
Long-term archiving on: : Sunday, April 4, 2010 - 11:01:27 PM


  • HAL Id : inria-00072270, version 1



Mohamed Mnif, Agnès Sulem. Optimal Risk Control under Excess of Loss Reinsurance. [Research Report] RR-4317, INRIA. 2001. ⟨inria-00072270⟩



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