A combined optimal dividend/reinsurance problem with two types of insurance claims, namely the expected premium principle and the variance premium principle, is discussed. Dividend payments are considered with both fixed and proportional transaction costs. The objective of an insurer is to determine an optimal dividend-reinsurance policy so as to maximize the expected total value of discounted dividend payments to shareholders up to ruin time. The problem is formulated as an optimal regular-impulse control problem. Closed-form solutions for the value function and optimal dividend-reinsurance strategy are obtained in some particular cases. Finally, some numerical analysis is given to illustrate the effects of safety loading on optimal reinsurance strategy.
|Number of pages||20|
|Journal||Probability in the Engineering and Informational Sciences|
|Publication status||Published - 1 Apr 2016|