Pricing in Reinsurance Bargaining with Comonotonic Additive Utility Functions
ASTIN Bulletin 46 (2), 507-530, 2016
26 Pages Posted: 29 Feb 2016 Last revised: 23 May 2016
Date Written: February 19, 2016
Optimal contracts have widely been studied in the literature, yet the bargaining for optimal prices has remained relatively unexplored. Therefore the key objective of this paper is to analyze the price of reinsurance contracts. We use a novel way to model the bargaining powers of the insurer and reinsurer, which allows us to generalize the contracts according to the Nash bargaining solution, indifference pricing, and the equilibrium contracts. We illustrate these pricing functions by means of inverse-S shaped distortion functions of the insurer and the Value-at-Risk for the reinsurer.
Keywords: Cooperative bargaining, reinsurance, contract design, comonotonic additive preferences
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