On November 2, Professor Manuel Guerra (ISEG) will present the study "On optimal reinsurance of dependent risks".
Abstract:
Buying reinsurance, an insurance company passes part of its risk exposure to another company, paying an agreed sum (premium) in compensation. By chosing different types of reinsurance, the insurer can cede different parts of the risk distribution. Often, reinsurance for different risks (i.e., for different lines of business, different sub-portfolios, or even different policies) are the object of separate contracts. It is well known that dependencies between separate risks strongly affect the overall risk exposure. Therefore, the choice of reinsurance contracts for different risks should take such dependencies into account. However, the precise effect of such dependencies has been difficult to characterize. We discuss the problem of finding the optimal portfolio of reinsurance policies under generic dependence structures. We show that such a portfolio exists and can be computed. However, it lacks some desirable properties, namely it often induces situations of "moral hazard". We consider additional constraints to exclude such situations, and obtain optimal reinsurance portfolios free of obvious moral hazards.
The research seminars will take place from September 21 to December 14, on Wednesdays, from 1:00 PM to 2:00 PM, at the Novo Banco Amphitheater (Quelhas Building, 4th floor).
Faculty from ISEG and other national and international schools will participate in the sessions, when they will address topics related with Economics, Management, Finance, Social Sciences, and Mathematics.
Free admission.
