2.4.7.
Finite Reinsurance
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Multi-period contract with an experience account and a risk component.
The finite reinsurance contract consists of two parts: An experience account and a risk part. This contract is a multi-period contract.
Input:
Model inputs:
For each period t, the finite re component receives list of claims C. These can be the ceded or the net claims produced by another reinsurance component. This has been decided by the model developer and cannot be changed by a model user.
User inputs: t refers to a time period
- the overall premium P(t) of the finite re contract in period t
- The fraction α(t) of the premium which is allocated to the experience account.
Output:
Experience Account
- premium P_ ea(t)
- claims C_ea(t)
- balance B(t) of the experience account
Risk Part:
- premium P_risk(t)
- claims C_risk(t)
- result R_risk(t) from the outset until the end of period t
Validation:
none implemented, but should be
- P(t) > 0
- 0 =< α(t) =<1
Calculation:
- P_ea(t) = α(t) * P(t)
- P_risk(t) = (1 - α(t)) * P(t)
- C_ea(t) = min(B(t-1) + P_ea(t), C(t)), if t-1 refers to a period before the start of the contract, then B(t-1) is set to 0
- C_risk(t) = C(t) - C_ea(t)
- B(t) = B(t-1) + P_ea(t) - C_ea(t). The definition of C_ea(t) ensures that the B(t) >= 0
- R_risk(t) = R_risk(t-1) + P_risk(t) - C_risk(t), if t-1 refers to a period before the start of the contract, then R_risk(t-1) is set to 0
