On PBIL, DE and PSO for optimization of reinsurance contracts

Abstract

In this paper, we study from the perspective of an insurance company the Reinsurance Contract Placement problem. Given a reinsurance contract consisting of a fixed number of layers and a set of expected loss distributions (one per layer) as produced by a Catastrophe Model, plus a model of current costs in the global reinsurance market, identifying optimal combinations of placements (percent shares of subcontracts) such that for a given expected return the associated risk value is minimized. Our approach explores the use bio-inspired metaheuristics with the goal of determining which evolutionary optimization approach leads to the best results for this problem, while being executable in a reasonable amount of time on realistic industrial sized problems.