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On impact of largest claims reinsurance treaties on the ceding company’s loss reserve

Part of: Applications Stochastic processes Decision theory

Published online by Cambridge University Press:  01 February 2023

Fatemeh Atatalab  and
Amir T Payandeh Najafabadi Open the ORCID record for Amir T Payandeh Najafabadi [Opens in a new window]
Fatemeh Atatalab
Affiliation:
Department of Actuarial Science, Faculty of Mathematical Sciences, Shahid Beheshti University, Evin, 1983969411 Tehran, Iran
Amir T Payandeh Najafabadi*
Affiliation:
Department of Actuarial Science, Faculty of Mathematical Sciences, Shahid Beheshti University, Evin, 1983969411 Tehran, Iran
*
*Corresponding author. E-mail: amirtpayandeh@sbu.ac.ir
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Abstract

This article examines the impact of the largest claims reinsurance treaties on loss reserve of the ceding company. The largest claims reinsurance, known as LCR, and ECOMOR reinsurance treaties are considered to be the two most appropriate reinsurance treaties for large or catastrophe claims. Then, it studies the impact of such treaties on loss reserves. Through a simulation study, it shown that, under a more general situation, the LCR treaty can be a more efficient (in some sense, see below) treaty than the ECOMOR treaty for the ceding company.

Keywords

Loss reserveReinsuranceMean square error of predictionSimulation

MSC classification

Primary: 62P05: Applications to actuarial sciences and financial mathematics
Secondary: 60G25: Prediction theory 62C05: General considerations
Type
Original Research Paper
Information
Annals of Actuarial Science , Volume 17 , Issue 2 , July 2023 , pp. 328 - 357
Copyright
© The Author(s), 2023. Published by Cambridge University Press on behalf of Institute and Faculty of Actuaries

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