Default risk estimation in reinsurance contracts on the base of simulation model
The estimation of the default risk is an important point for an insurance company. There are a number of mechanisms used in insurance which influences the default risk. One of them is reinsurance, where part of risk is taken on charge by the reinsurance company. We consider excess-of-loss reinsurance, which means that each insurance contract is reinsured individually. The main goal of this paper is to analyze the dependency of the default risk from the chosen retention limit. As a main result we discover the new phenomena of a possible jump of the reliability function, which has an important practical influence on the default risk estimation.