Insurance policy value and Pareto-optimal retention in the hypothesis of rare loss events

Details Insurance policy value and Pareto-optimal retention in the hypothesis of rare loss events Insurance policy value and Pareto-optimal retention in the hypothesis of rare loss events

1998-06-07

arxiv.org/abs/math/9806030v2

Mathematics

Probability

33 pages; PDF and PS; three references added; independence hypothesis no more invoked in deriving eq. (16), that holds true in

Scientific paper

In the hypothesis of rare loss events, the general expression of the policy value has been determined as a functional of the "expected frequency / loss severity" function and of the retention function. Exponential disutility has been chosen after mathematical characterization of some of its economical aspects, where functional properties of quasiarithmetic averages have been used. By means of variational techniques, in the case of a risk neutral Insurer the Pareto-optimal retention function has been finally determined.

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