Journal article

Optimal reinsurance under multiple attribute decision making


ANNALS OF ACTUARIAL SCIENCE | Cambridge University Press (CUP) | Published : 2016


We apply methods from multiple attribute decision making (MADM) to the problem of selecting an optimal reinsurance level. In particular, we apply the Technique for Order of Preference by Similarity to Ideal Solution method with Mahalanobis distance. We consider the classical risk model under a reinsurance arrangement – either excess of loss or proportional – and we consider scenarios that have the same finite time ruin probability. For each of these scenarios we calculate three quantities: released capital, expected profit and expected utility of resulting wealth. Using these inputs, we apply MADM to find optimal retention levels. We compare and contrast our findings with those when decision..

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University of Melbourne Researchers


Awarded by International Doctoral Research Fellowship Program-TUBITAK

Funding Acknowledgements

The authors would like to thank the associate editor and referee whose feedback greatly improved this paper. Basak Bulut Karageyik has been supported by the 2214/A-International Doctoral Research Fellowship Program-TUBITAK during her studies at the University of Melbourne.