Quota Share Reinsurance and Excess of Loss Reinsurance Calculations Using Ruin's Theory

Dwi Susanti
Riaman
Badrulfallah
Dimas Apriliyanto

Eksakta : Berkala Ilmiah Bidang MIPA
Vol. 25 No. 03 (2024): Eksakta : Berkala Ilmiah Bidang MIPA (E-ISSN : 2549-7464)

Ruin theory is commonly used to predict the likelihood of bankruptcy for an insurance company and relates to the rate of surplus of the insurance company for the insurance policy portfolio. Considering the change in the insurance fund from time to time, the timing of the occurrence of a number of claims is highly taken into account. Ruin theory is necessary so that companies can anticipate and detect bankruptcy early. One way to help insurance companies minimize their bankruptcy chances is through reinsurance. In this paper, will discuss about application of ruin theory in computing two methods of reinsurance treaty, that is Quota Share Reinsurance and Excess of Loss Reinsurance to decide more effective method to minimize probability of ruin. Results show that Excess of Loss Reinsurance method more effective than Quota Share Reinsurance method to minimize ruin probability of insurance company.