Worst-Case Investment and Reinsurance Optimization for an Insurer under Model Uncertainty

Abstract EN

In this paper, we study optimal investment-reinsurance strategies for an insurer who faces model uncertainty.

The insurer is allowed to acquire new business and invest into a financial market which consists of one risk-free asset and one risky asset whose price process is modeled by a Geometric Brownian motion.

Minimizing the expected quadratic distance of the terminal wealth to a given benchmark under the “worst-case” scenario, we obtain the closed-form expressions of optimal strategies and the corresponding value function by solving the Hamilton-Jacobi-Bellman (HJB) equation.

Numerical examples are presented to show the impact of model parameters on the optimal strategies.