ON A DIVIDEND STRATEGY OF INSURANCE COMPANIES

The problem of finding the optimal dividend strategy is very important for insurance companies. In order to solve this problem a discounted cash flow model has been used which is a special case of valuation models. The authors analyze the surplus of an insurance company with attention focused on probability of ruin. The purpose of the paper is to solve the same situation, however, for the so-called large claims. It is well known that the ruin problem which is closely related to the dividend strategy problem leads to different results for such claims. On the other hand insurance companies are now confronted with such claims more often than before. The last section of the paper deals with the question how the dividend strategy should be changed after ruin happens. A solution is mentioned suggested by several actuaries that instead of maximizing the expected discounted sum of dividends the difference between them and the deficit at ruin should be maximized.