Economic Analysis: Theory and Practice
 

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Optimization of insurance company's business sustainability

Vol. 18, Iss. 1, JANUARY 2019

Received: 10 September 2018

Received in revised form: 28 September 2018

Accepted: 12 October 2018

Available online: 29 January 2019

Subject Heading: BUSINESS PERFORMANCE

JEL Classification: С02

Pages: 96–107

https://doi.org/10.24891/ea.18.1.96

Sukhorukova I.V. Plekhanov Russian University of Economics, Moscow, Russian Federation
suhorukovaira@yandex.ru

https://orcid.org/0000-0002-1944-0968

Chistyakova N.A. Plekhanov Russian University of Economics, Moscow, Russian Federation
chistna@mail.ru

ORCID id: not available

Subject The article addresses the calculation of optimal indices of insurance reserves when regulating and managing the process of joint commercial activity of several partners in the event of early termination of business by either party due to external circumstances.
Objectives The aim is to substantiate the actuarial method of calculation and the working formulas for calculation of mathematical reserve under insurance contracts with several insured parties, providing a balanced solution to social and economic problems and insurance portfolio sustainability.
Methods We employed probability-theoretical methods of work with vector-type random values and characters, and actuarial models for mathematical reserve calculation.
Results The paper provides a scientific and methodological substantiation and presents an economic and mathematical model to calculate reserves for coinsurance contracts that are exposed to the risk of early termination of business by either party due to external circumstances. We obtained working formulas for calculation of mathematical reserve at any time during the term of the contract, formulated scientific and practical recommendations on coinsurance of commercial activity of several partners if faced with early termination by either party due to external circumstances.
Conclusions The findings show that the developed methodology can be applied to both a certain type of insurance product and to contracts that include different types of insurance products. This will enable to increase the liability of insurance companies for the implications of their tariff policy. The offered methods allow to consider possible risks at all stages of decision-making and avoid adverse economic effect in the business.

Keywords: insurance tariff, net rate, distribution density, distribution function, economic and mathematical model of risk insurance

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