Optimal Reinsurance Strategies under Sharpe Ratio

It is very important for an insurer to transfer risks when he underwrites a catastrophe risk.Reinsurance is a process that risk is ceded from an insurer to a reinsurance company.The key problem is how to design optimal reinsurance policy.In terms of Sharpe Ratio,which is commonly used to risk controlling and performance appraisals in financial industry,we construct a risk model in which the insurer's Sharpe Ratio is maximized by setting the reinsurance strategies.Considering the quota-share reinsurance and stop-loss reinsurance,we obtain the optimal retention ration and the optimal retention level respectively to reach the maximum of Sharp Ratio.This research is helpful for insurance companies to design reinsurance contracts in practice.