Prediction of the Cedent's Loss Reserve Under Some Reinsurance Treaties

Abstract

This article examines the impact of some traditional reinsurance treaties on the loss reserve of the ceding company. More precisely, it considers quota share treaty, surplus treaty, excess-of-loss treaty, and two combinations of them. Then, it develops a theoretical foundation for predicting the cedent's loss reserve and evaluating such prediction using the mean square error of prediction. The application of our findings has been given for a car collision insurance loss portfolio. Moreover, the impact of such reinsurance treaties on the variability of the cedent's loss reserve has been investigated through a simulation study.