Equilibrium premium strategies in a competitive non-cooperative insurance market
Seminar in Insurance and Economics
Please note that the talk takes place in Auditorium 3 of the August Krogh Building just opposite HCØ. Further details and a map can be found via https://www1.bio.ku.dk/english/about/premises/akb/.
SPEAKER: Rafael Serrano (Universidad del Rosario).
TITLE: Equilibrium premium strategies in a competitive non-cooperative insurance market.
ABSTRACT: In this paper, we study a stochastic differential n-player game to find optimal premium strategies of nonlife insurers in a competitive market setting. Demand functions and average claim arrival rates depending on the premium rates determine the sizes and aggregate arrival rates of insurance portfolios. Competitors seek to maximize the expected discounted lifetime utility of intermediate relative consumption, under the assumption of self-financing risk reserves and constant absolute risk aversion for each firm. To illustrate our results, we consider contracts with different deductibles, in which customers know their arrival rate but insurers know only their distribution among customers. This leads to competition via product differentiation. We also consider a frictional market model with search costs. Joint work with Bent Jesper Christensen and Juan Carlos Parra-Alvarez (Aarhus, Denmark). If time allows I will present preliminary results of an ongoing project on optimal insurance premium control for multiple business lines with dependent risks. Dependence in frequency and severity is captured via a Lévy copula, which yields a model with comparably few parameters. We study the effect of the dependence strength on optimal premiums using comparison results for Levy measures.