The optimal reinsurance arrangement is identified whenever the reinsurer counterparty default risk is incorporated in a one-period model. Our default risk model allows the possibility for the reinsurer to fail paying in full the promised indemnity, whenever it exceeds the level of regulatory...

The optimal reinsurance contract is investigated from the perspective of an insurer who would like to minimise its risk exposure under Solvency II. Under this regulatory framework, the insurer is exposed to the retained risk, reinsurance premium and change in the risk margin requirement as a...