Optimal reinsurance contract and investment strategy for multiple competitive-cooperative insurers and a reinsurer

Abstract

Abstract Accepted by: Giorgio Consigli In this article, we consider a reinsurance contract design by taking into account the joint interests of multiple insurers and a reinsurer. The reinsurance contract consists of optimal reinsurance strategies and reinsurance prices. The former are chosen by the competitive–cooperative insurers and the latter are determined by a reinsurer. Both insurers and the reinsurer can invest in the common risk-free asset and one different risky asset. The optimal time-consistent reinsurance–investment strategies of the insurers and the optimal reinsurance prices and investment strategy of the reinsurer are derived analytically. Numerical experiments are carried out to illustrate the influences of model parameters on the optimal reinsurance contract and optimal investment strategies. We find that the establishment of the reinsurance contract is affected by the correlation between the claim sizes of insurers as well as that of claim numbers. The results reveal that competition and cooperation will lead to a decrease and increase of the reinsurance price, respectively, showing the importance of opting for cooperation among insurers. Both competition and cooperation are beneficial to insurers, especially for those with high risk aversion.