We propose an optimization approach to allocating economic capital, distinguishing between an allocation principle and a measure for the risk residual...

In this paper we develop a framework for optimal investment decisions for insurance companies in the presence of (partially) unhedgeable risk. The perspective that we choose is from an insurance company that maximises the stream of dividends paid to its shareholders. The policy instruments that...

This paper investigates the effects of an increase in ambiguity aversion and an increase in ambiguity in an insurance bargaining game with a risk-and-ambiguity-neutral insurer and a risk-and-ambiguity-averse client. Both a cooperative and a non-cooperative bargaining game are examined. We show...

We consider the traditional model of an insurance market that consists of high-risk and low-risk individual customers who are identical except for their accident probabilities. Though insurers know the values of the high-risk and low-risk accident probabilities, each individual customer’s...

In the paper we analyze the iterativity condition for zero utility principle adjusted to Cumulative Prospect Theory. We prove, under mild conditions, that the premium principle is iterative if and only if the value function is linear or exponential and probability distortion functions are...

The aim of this paper is to introduce a premium principle which relies on Cumulative Prospect Theory by Kahneman and Tversky. Some special cases of this premium principle have already been studied in the actuarial literature. In the paper, properties of this premium principle are examined.

We study the problem of optimal reinsurance as a means of risk management in the regulatory framework of Solvency II under Conditional Value-at-Risk and, as its natural extension, spectral risk measures. First, we show that stop-loss reinsurance is optimal under both Conditional Value-at-Risk...

A prominent problem in actuarial science is to define, or describe, premium calculation principles (pcp's) that satisfy certain properties. A frequently used resolution of the problem is achieved via distorting (e.g., lifting) the de-cumulative distribution function, and then calculating the...

This paper provides a closed-form Value-at-Risk (VaR) for the net exposure of an annuity provider, taking into account both mortality and interest-rate risk, on both assets and liabilities. It builds a classical risk-return frontier and shows that hedging strategies -- such as the transfer of...

This Special Issue of the Insurance: Mathematics and Economics contains 16 contributions to the academic literature all dealing with longevity risk and capital markets. Draft versions of the papers were presented at Longevity 15: The Fifteenth International Longevity Risk and Capital Markets...