Optimal reinsurance and investment strategies for insurers with regime-switching and state-dependent utility function

Abstract

This paper considers a proportional reinsurance-investment problem and an excess-of-loss reinsurance-investment problem for an insurer, where price processes of the risky assets and wealth process of the insurer are both described by Markovian regime switching. The target of the insurer is assumed to maximize the expected exponential utility from her terminal wealth with a state-dependent utility function. By employing the dynamic programming approach, the optimal value functions and the optimal reinsurance-investment strategies are derived. In addition, the impact of some parameters on the optimal strategies and the optimal value functions is analyzed, and lots of interesting results are discovered, such as the conclusion that excess-of-loss reinsurance is better than proportional reinsurance is not held in the regime-switching jump-diffusion model.