New Data from University of Liverpool Illuminate Findings in Insurance Economics (Marginal Indemnification Function formulation for optimal…

New Data from University of Liverpool Illuminate Findings in Insurance Economics (Marginal Indemnification Function formulation for optimal reinsurance)

By a News Reporter-Staff News Editor at Insurance Weekly News -- Fresh data on Insurance Economics are presented in a new report. According to news reporting originating from Liverpool, United Kingdom, by VerticalNews correspondents, research stated, "In this paper, we propose to combine the Marginal Indemnification Function (MIF) formulation and the Lagrangian dual method to solve optimal reinsurance model with distortion risk measure and distortion reinsurance premium principle. The MIF method exploits the absolute continuity of admissible indemnification functions and formulates optimal reinsurance model into a functional linear programming of determining an optimal measurable function valued over a bounded interval."

Our news editors obtained a quote from the research from the University of Liverpool, "The MIF method was recently introduced to analyze the reinsurance model but without premium budget constraint. In this paper, a Lagrangian dual method is applied to combine with MIF to solve for optimal reinsurance solutions under premium budget constraint. Compared with the existing literature, the proposed integrated MIF-based Lagrangian dual method provides a more technically convenient and transparent solution to the optimal reinsurance design."

According to the news editors, the research concluded: "To demonstrate the practicality of the proposed method, analytical solution is derived on a particular reinsurance model that involves minimizing Conditional Value at Risk (a special case of distortion function) and with the reinsurance premium being determined by the inverse-S shaped distortion principle."

For more information on this research see: Marginal Indemnification Function formulation for optimal reinsurance. Insurance Mathematics & Economics, 2016;67():65-76. Insurance Mathematics & Economics can be contacted at: Elsevier Science Bv, PO Box 211, 1000 Ae Amsterdam, Netherlands.

The news editors report that additional information may be obtained by contacting S.C. Zhuang, University of Liverpool, Inst Financial & Actuarial Math, Peach St, Liverpool L69 7ZL, Merseyside, United Kingdom. Additional authors for this research include C.G. Weng, K.S. Tan and H. Assa.

Keywords for this news article include: Europe, Liverpool, United Kingdom, Insurance Economics

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