Determination of the portfolio selection for a property-liability insurance company |
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Authors: | Susan X. Li Zhimin Huang |
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Affiliation: | School of Management and Business, Adelphi University, Garden City, NY 11530, USA |
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Abstract: | This paper presents an analysis of a portfolio model which can be used to assist a property-liability insurance company in determining the optimal composition of the insurance and investment portfolios. By introducing insurer's threshold risk and relaxing some non-realistic assumptions made in traditional chance constraint insurance and investment portfolio models, we propose a method for an insurer to maximize his return threshold for a given threshold risk level. This proposed model can be used to optimize the composition of underwriting and investment portfolios regarding the insurer's threshold risk level, as well as to generate the efficient frontier by adjusting insurer's threshold risk levels. A numerical example is given based on the industry's aggregated data for a sixteen year period. |
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Keywords: | Optimization Chance constrained programming Threshold risk Portfolios of insurances investments |
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