The Research Of Reinsurance Optimization Based On The Dual Objective Function

Some studies about reinsurance optimization problem are always one of issues concernedabout. There seems to be so many different scholars studied reinsurance optimization problem.While there are many places need to improve about reinsurance optimization problem.Therefore, we should continue to explore study about reinsurance optimization problem.In the paper, Return on Risk-Adjusted Capital (RORAC) is used to measure the profit ofthe insurance company and the reinsurance company as a target of measuring the profit. Andthe variance is used to measure volatility of risk of the insurance company and the reinsurancecompany. On the basis of above, we can establish the bi-objective quota share reinsuranceoptimization model. We can get the optimal retention rate of the quota share reinsurancethrough the bi-objective quota share reinsurance optimization model and analyzing theexamples. And we analyzed the relation between the preference of risk and the optimalretention ratio, that is, a negative relationship. Then we also respectively analyzed therelationship that the optimal retention ratio and the preference of risk with the profit and thevolatility of risk of the insurance company and the reinsurance company through Matlabprogramming software. With the increasing of the weight of risk preference, the decisionmakers are more likely to value risk, the smaller the optimal retention ratio is, the smaller thebenefits and the risk of insurance company are, however, the bigger the benefits and the riskof reinsurance company are. When0.1~0.5, with the bigger become, the profit andthe volatility of risk of the insurance company and the reinsurance company are changingbigger. When0.5~0.9, with the bigger become, the profit and the volatility of risk ofthe insurance company and the reinsurance company are changing smaller. At last, theyconverge to a certain number. This is all contents of the paper.