Pricing in Reinsurance Bargaining with Comonotonic Additive Utility Functions

ASTIN Bulletin 46 (2), 507-530, 2016

26 Pages Posted: 29 Feb 2016 Last revised: 23 May 2016

See all articles by Tim J. Boonen

Tim J. Boonen

University of Amsterdam

Ken Seng Tan

University of Waterloo

Sheng Chao Zhuang

University of Nebraska Lincoln

Date Written: February 19, 2016

Abstract

Optimal contracts have widely been studied in the literature, yet the bargaining for optimal prices has remained relatively unexplored. Therefore the key objective of this paper is to analyze the price of reinsurance contracts. We use a novel way to model the bargaining powers of the insurer and reinsurer, which allows us to generalize the contracts according to the Nash bargaining solution, indifference pricing, and the equilibrium contracts. We illustrate these pricing functions by means of inverse-S shaped distortion functions of the insurer and the Value-at-Risk for the reinsurer.

Keywords: Cooperative bargaining, reinsurance, contract design, comonotonic additive preferences

Suggested Citation

Boonen, Tim J. and Tan, Ken Seng and Zhuang, Sheng Chao, Pricing in Reinsurance Bargaining with Comonotonic Additive Utility Functions (February 19, 2016). ASTIN Bulletin 46 (2), 507-530, 2016, Available at SSRN: https://ssrn.com/abstract=2738748

Tim J. Boonen

University of Amsterdam ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

HOME PAGE: http://www.uva.nl/profiel/b/o/t.j.boonen/t.j.boonen.html

Ken Seng Tan

University of Waterloo ( email )

Waterloo, Ontario N2L 3G1
Canada

Sheng Chao Zhuang (Contact Author)

University of Nebraska Lincoln ( email )

Lincoln, NE 68588
United States
4024722330 (Phone)

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