a study on rate making and required reserves determination in reinsurance market: a simulation

reinsurance is widely recognized as an important instrument in the capital management of an insurance company as well as its risk management tool. this thesis is intended to determine premium rates for different types of reinsurance policies. also, given the fact that the reinsurance coverage of every company depends upon its reserves, so different types of reserves and the method of their calculation in insurance companies will be investigated in this research. we are going to response these two main queries including how the premium rate is calculated and also how the required reserve is determined in reinsurance market. it must be noted that the flat rate pricing formula and the pareto and gamma distributions are used for illustrative purposes. also, because of unavailability of reinsurance data we had to use simulation to generate required data. from the research we expect that the insurers with a full knowledge of the types of reserves required by the reinsurance and insurance company- noted in this study- will be able to choose the most appropriate reinsurance coverage with a fair premium. it must be mentioned that although reinsurance assists companies in improving their risk and financial situations, excessive use of reinsurance may lead to failure of the insurer if its reinsurers fail to meet their obligations. therefore, sound and prudent management practices should be applied when insurers use reinsurance.