Indifference pricing of insurance contracts in a product space model: applications

This paper determines fair premiums and optimal strategies under the financial variance and standard deviation principles of Schweizer [Insur.: Math. Econ. 28 (2001b) 31] for some insurance contracts with financial risk. Examples considered include unit-linked pure endowment contracts and integrated risk management solutions such as stop-loss contracts with barrier and financial stop-loss contracts. In each example we illustrate how the amount of information available to the reinsurer affects premiums and investment strategies. In addition, we determine the simple upper and lower bounds for the fair premiums that were obtained in [Finan. Stochast., in press]. (C) 2003 Elsevier Science B.V. All rights reserved.