On the Devylder–Goovaerts Conjecture in Ruin Theory

Abstract

The Devylder–Goovaerts conjecture is probably the oldest conjecture in actuarial mathematics and has received a lot of attention in recent years. It claims that ruin with equalized claim amounts is always less likely than in the classical model. Investigating the validity of this conjecture is important both from a theoretical aspect and a practical point of view, as it suggests that one always underestimates the risk of insolvency by replacing claim amounts with the average claim amount a posteriori. We first state a simplified version of the conjecture in the discrete-time risk model when one equalizes aggregate claim amounts and prove that it holds. We then use properties of the Pareto distribution in risk theory and other ideas to target candidate counterexamples and provide several counterexamples to the original Devylder–Goovaerts conjecture.