Journal article

Minimizing the ruin probability through capital injections

Ciyu Nie, David CM Dickson, Shuanming Li

Annals of Actuarial Science | Cambridge University Press (CUP) | Published : 2011


AbstractWe consider an insurer who has a fixed amount of funds allocated as the initial surplus for a risk portfolio, so that the probability of ultimate ruin for this portfolio is at a known level. We consider the question of whether the insurer can reduce this ultimate ruin probability by allocating part of the initial funds to the purchase of a reinsurance contract. This reinsurance contract would restore the insurer's surplus to a positive level k every time the surplus fell between 0 and k. The insurer's objective is to choose the level k that minimizes the ultimate ruin probability. Using different examples of reinsurance premium calculation and claim size distribution we show that thi..

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