Worst-Case Reinsurance Strategy with Likelihood Ratio Uncertainty

In this webinar, we explore a non-cooperative optimal reinsurance problem under likelihood ratio uncertainty, aiming to minimize the insurer's worst-case retained loss. We relate the optimal reinsurance strategy under the reference measure to that in the worst-case scenario, with generalizations to insurance design problems using tail risk measures. We also identify distortion risk measures where the insurer’s optimal strategy remains unchanged in the worst-case. Using an expectable risk measure, we determine optimal policies for the worst-case. Additionally, we examine a cooperative problem as a general risk-sharing model between two agents in a comonotonic market, comparing outcomes with the non-cooperative case. 

Read the paper here: https://doi.org/10.1017/asb.2025.1