Optimal Proportional Reinsurance Strategy Using Dynamic Programming

Abstract

This paper is concerned with stochastic optimization in continuous time and its application in reinsurance. It deals with a model of optimization reinsurance which makes it possible to maximize the technical benefit of an insurance company and to minimize the risk for a given period. Indeed, here we discuss a stochastic optimal control problem to determine the optimal risk management strategy, the purpose of which is to identify the appropriate level of transfer rate for "quota share" reinsurance contracts, which are most appropriate to the risk profile of an insurance company. In addition, we use a resolution approach based on dynamic programming and the HJB equation in order to reach the aforementioned aim, which is finding the optimal strategy for reinsurance to adapt better for insurance company.