Robust reinsurance and investment strategies under principal–agent framework

Ning Wang, Tak Kuen Siu, Kun Fan

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)


In this paper, a class of reinsurance contracting problems is examined under a continuous-time principal–agent framework with mean-variance criteria, where a reinsurer and an insurer are assigned the roles of the principal and the agent, respectively. Both parties can manage their insurance risk by investing in a financial portfolio comprising a risk-free asset and a risky asset. It has been assumed that both the insurer and the reinsurer are concerned about model uncertainty and that they aim to find a robust reinsurance contract and robust investment strategies by maximizing their respective mean-variance cost functionals taking sets of probability scenarios into account. To articulate the time-inconsistency issue attributed to the mean-variance optimization criteria, the optimization procedure of each decision-maker has been formulated as a non-cooperative game and discussed by using an extended HJB equation, which is consistent with the extant work on time-consistent control. Moreover, explicit expressions for the robust reinsurance contract, the robust investment strategies and the value functions of the insurer and reinsurer have been obtained and presented. The numerical results and their economic interpretations are then discussed.
Original languageEnglish
Pages (from-to)981-1011
Number of pages31
JournalAnnals of Operations Research
Issue number1-2
Early online date26 Apr 2022
Publication statusPublished - May 2024


  • Mean-variance criterion
  • Model ambiguity
  • Principal–agent problem
  • Proportional reinsurance
  • Reinsurance premium


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