Optimal insurance design with a bonus

A theory of bonus in life insurance

The issue of bonus in life insurance is considered in a model framework where the traditional set-up is extended by letting the experience basis (mortality, interest, etc.) be stochastic. A novel definition of the technical surplus on an insurance contract is proposed, and basic principles for its repayment as bonus are discussed. Making the experience basis an endogenous part of the model open...

Bonus options in health insurance.

Optimal Bonus Strategies in Life Insurance: The Markov Chain Interest Rate Case

We study the problem of optimal redistribution of surplus in life and pension insurance when the interest rate is modelled as a continuous time Markov chain with a finite state space. We work with traditional participating life insurance policies with payments consisting of a specified contractual payment stream and an unspecified additional bonus payment stream. Our model allows for interest r...

Optimal insurance design of ambiguous risks

We examine the characteristics of the optimal insurance contract under linear transaction cost and an ambiguous distribution of losses. Under the standard expected utility model, we know from Arrow (1965) that it contains a straight deductible. In this paper, we assume that the policyholder is ambiguity-averse in the sense of Klibanoff, Marinacci and Mukerji (2005). The optimal contract depends...

Optimal Design of a Microgrid with Multiple Energies Considering Reliability

The unprecedented penetration of distributed generation in distribution network provides utilities with a unique opportunity to manage portions of networks as microgrids (MG). The implementation of an MG may offer many benefits, such as capital investments deferral, reduction of greenhouse gas emissions, improvement in reliability, and reduction in network losses. In order to draw the most effe...