Optimization of Surplus Reinsurance Treaty using the Conditional Tail Expectation

Abstract

In this work, we propose a new optimization strategy for reinsurance using the genetic algorithms. This approach is to determine an optimal structure of a "surplus" reinsurance contract by finding the optimal cession rates through an optimization model which is based on the minimization of the Conditional Tail Expectation (CTE) risk measure under the constraint of technical benefit. This approach can be seen as a decision support tool that can be used by managers to minimize the actuarial risk and maximize the technical benefit in the insurance company.