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Contribution Details

Type Journal Article
Scope Discipline-based scholarship
Title Optimal Risk-Sharing Across a Network of Insurance Companies
Organization Unit
Authors
  • Nicolas Ettlin
  • Erich Walter Farkas
  • Andreas Kull
  • Alexander Smirnow
Item Subtype Original Work
Refereed Yes
Status Published in final form
Language
  • English
Journal Title Insurance: Mathematics and Economics
Publisher Elsevier
Geographical Reach international
ISSN 0167-6687
Volume 95
Page Range 39 - 47
Date 2020
Abstract Text Risk transfer is a key risk and capital management tool for insurance companies. Transferring risk between insurers is used to mitigate risk and manage capital re- quirements. We investigate risk transfer in the context of a network environment of insurers and consider capital costs and capital constraints at the level of individual insurance companies. We demonstrate that the optimisation of profitability across the network can be achieved through risk transfer. Considering only individual in- surance companies, there is no unique optimal solution and, a priori, it is not clear which solutions are fair. However, from a network perspective, we derive a unique fair solution in the sense of cooperative game theory. Implications for systemic risk are briefly discussed.
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Digital Object Identifier 10.1016/j.insmatheco.2020.08.002
Other Identification Number merlin-id:19663
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Additional Information Insurance: Mathematics and Economics, 95, 39-47 (2020) Swiss Finance Institute Research Paper No. 20-52