Anales del Instituto de Actuarios Españoles, 3ª época, 21, 2015/1-30
Dividends and the Time of Ruin under Barrier Strategies with a Capital-Exchange Agreement
Hansjoerg Albrecher1 Volkmar Lautscham2
We consider a capital-exchange agreement, where two insurers recapitalize each other in certain situations with funds they would otherwise use for dividend payments. We derive equations characterizing the expected time of ruin and the expected value of the respective discounted dividends until ruin, if dividends are paid according to a barrier strategy. In a Monte Carlo simulation study we illustrate the potential advantages of this type of collaboration.