A non-zero-sum investment and reinsurance game between two mean–variance insurers with dynamic CVaR constraints

Abstract

This paper is devoted to investigating a non-zero-sum game between two competing insurers. The insurers can diversify their insurance risks by purchasing proportional reinsurance and investing their collected premiums into a financial market composed of one risk-free asset and one stock. The reinsurance premiums charged by the reinsurer follow the generalized mean–variance premium principle. Moreover, the dynamic CVaR constraints are incorporated in the game problem to control risks. With the dynamic mean–variance objective, we introduce two forward deterministic auxiliary processes to represent the expectations of the insurers’ wealth processes and transform the original time inconsistent game problem into a standard time consistent game problem with two state variables for each insurer. By adopting the dynamic programming principle and the Lagrange duality method, we derive the Nash equilibrium investment–reinsurance strategies for the two insurers. Finally, the effects of several important model parameters on the optimal policies are analyzed by numerical examples.