Gee Lee
Michigan State University
Title
Developments in Insurance Portfolio Risk Retention
Abstract
In this talk, new developments in the insurance risk retention problem of determining the optimal retention parameters will be explored in a multivariate context. Given an underlying claims distribution and premium constraint, an insurance company analyst may be interested in finding the optimal amount of risk to retain or, equivalently, which level of risk retention parameters to choose. The risk retention parameter may be deductible, upper limit, or coinsurance. Numerical approaches to solve the risk retention problem will be presented along with some details on how it can be applied to real data. The method will be illustrated with a case study using the Wisconsin Local Government Property Insurance Fund (LGPIF) data, where the minimum amount of aggregate premium to be collected will be used as a constraint to the optimization problem of finding the upper limits of the policies. Areas of future work will be discussed during the talk as well.
