A reinsurance game between two insurance companies with nonlinear risk processes

Abstract

In this paper, we consider a stochastic differential reinsurance game between two insurance companies with nonlinear (quadratic) risk control processes. We assume that the goal of each insurance company is to maximize the exponential utility of the difference between its terminal surplus and that of its competitor at a fixed terminal time T. First, we give an explicit partition (including nine subsets) of time interval [0,T]. Further, on every subset, an explicit Nash equilibrium strategy is derived by solving a pair of Hamilton–Jacobi–Bellman equations. Finally, for some special cases, we analyze the impact of time t and quadratic control parameter on the Nash equilibrium strategy and obtain some simple partition of [0,T]. Based on these results, we apply some numerical analysis of the time t, quadratic control parameter and competition sensitivity parameter on the Nash equilibrium strategy and the value function.