A Study On Non-life Insurance Pricing Models Based On Backward Stochastic Differential Equation

Insurance have interpenetrated and developed with finance in recent years, and theoperation income has already transferred from underwriting to investment, also the insurancecompany has developed from the traditional style to the financial insurance company.Meanwhile, the insurance price is whether reasonable or not can directly affect the marketcompetitiveness of the company, so how to make it has always been the focus of the researchscholars and insurer officers. As a economic-developed province, Guangdong’s demand ofproperty insurance has been increasing with the strengthen of risk awareness. Therefore,discussing the insurance fund investment deeply, finding the rule of the rate for theGuangdong property insurance and giving the corresponding pricing method, have profoundtheoretical and practical significance for our property insurance pricing.The appearance of the backward stochastic differential equation (BSDE) has resolved theproblem in some extent and remedied the deficiency of the traditional pricing model. Thisarticle can be divided into the following several parts:On one hand, we use the property’s earning and risking data of Guangdong to calculatethe optimal portfolio. On the other hand, we analyze the time series of the existingcompensate ratio data by quarter and month. At last, we build the BSDE which takes theoptimal investment portfolio and the compensate ratio distribution into account, so as toprovide a reference for the present pricing method.At the end of this article, we make a main conclusion: Firstly, the optimal portfolio forour insurance fund is:3.41percent on deposit,1.59percent on national debts,1.42percent onfinancial debts,2.29percent on corporate bonds,48.68percent on security investment funds,42.60percent on stock. This paper suggest that we need to release the supervise on investableassets further by comparing the abroad investment structure and analyzing the home policy.Secondly, the distribution of the insurance rate appears to have monthly differences, we canmake the monthly price rate base on the BSDE, so as to provide a feasible suggestion forcurrent pricing method.