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| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | Risk Sharing: between profitability and systemic risk |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Number of Pages | 61 |
| Date | 2020 |
| Abstract Text | Insurance companies use risk sharing to improve their profitability by mitigating their losses and reducing their cost of capital. Optimizing risk sharing across a network of insurance companies leads to a minimization problem of the risk-based capital of the network. We obtain the optimal risk transfer scheme using a numerical simulation of a risk sharing network based on an optimality criterion. This optimality criterion, widely used in the field of cooperative game theory, describes a unique and fair way to transfer risk in a coalition of insurance companies. We analyze and implement both the proportional and the non-proportional risk transfer approaches. In a second part, we study the effect of risk sharing on systemic risk. We introduce a risk measure called SyRi that quantifies the systemic risk contributions of the insurers of the network. SyRi is based on a stress test methodology and uses elements of the risk sharing simulation. We also briefly discuss a regulatory regime build by interchanging proportional and non-proportional risk sharing. |
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