The Optimal Time to Merge Two First-Line Insurers with Proportional Reinsurance Policies | Zendy

Yanan Li | Zendy; Chuanzheng Li | Zendy

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The Optimal Time to Merge Two First-Line Insurers with Proportional Reinsurance Policies

Author(s) -

Yanan Li,

Chuanzheng Li

Publication year - 2021

Publication title -

mathematical problems in engineering

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.262

H-Index - 62

eISSN - 1026-7077

pISSN - 1024-123X

DOI - 10.1155/2021/1423325

Subject(s) - reinsurance , merge (version control) , actuarial science , mathematical optimization , computer science , mathematics , economics , information retrieval

We examine the optimal time to merge two first-line insurers with proportional reinsurance policies. The problem is considered in a diffusion approximation model. The objective is to maximize the survival probability of the two insurers. First, the verification theorem is verified. Then, we divide the problem into two cases. In case 1, never merging is optimal and the two insurers follow the optimal reinsurance policies that maximize their survival probability. In case 2, the two insurers follow the same reinsurance policies as those in case 1 until the sum of their surplus processes reaches a boundary. Then, they merge and apply the merged company’s optimal reinsurance strategy.

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