Risk management through proportional reinsurance: an efficient computational approach

We introduce the concept of intuitive optimality in the context of quota-share proportional reinsurance. This concept is based on the intuitive use of reinsurance to decrease the riskiness of each policy in a portfolio to an acceptable threshold. The chosen metric for risk assessment is the ratio of covariance to the expected profit. Building on this concept, we develop an iterative procedure that rapidly converges to a fixed point for any specified risk threshold level. Notably, this fixed point aligns with the efficiency mean-variance point produced by the threshold value in the definettian approach.