Insurance pricing and increased limits ratemaking by proportional hazards transforms. (English) Zbl 0837.62088

Summary: This paper proposes a new premium principle, where risk loadings are imposed by a proportional decrease in the hazard rates. This premium principle is scale invariant and additive for layers. It is shown that this principle will generate stop-loss contracts as optimal reinsurance arrangements in a competitive market when the reinsurer is less risk- averse than the direct insurer. Finally, increased limits factors are calculated based on this principle.


62P05 Applications of statistics to actuarial sciences and financial mathematics
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