Symposium Interplay between Mathematical Finance and Insurance
location:Aarhus (Denmark), Jun. 18-21
We examine properties of risk measures that can be considered to be in line with some 'best practice' rules in insurance, based on solvency margins. We give ample motivation that all economic aspects related to an insurance portfolio should be considered in the definition of a risk measure. As a consequence, conditions arise for comparison as well as for addition of risk measures. We demonstrate that imposing properties that are generally valid for risk measures, in all possible dependency structures, based on the difference of the risk and solvency margin, though providing opportunities to derive nice mathematical results, violate best practice rules. We show that so-called coherent risk measure related to a discrete ruin model, depending on the initial surplus, the desired ruin probability and the risk distribution.