Non-zero-sum reinsurance and investment game with non-trivial curved strategy structure under Ornstein–Uhlenbeck process

ABSTRACT This paper investigates a non-zero-sum stochastic differential game between two competitive CARA insurers, where we adopt the different classes of premium principles (including the expected value premium principle, the variance premium principle and the exponential premium principle) and each insurer aims to maximize the expected exponential utility of his terminal wealth relative to that of his competitor. Moreover, both insurers are allowed to purchase reinsurance treaty to mitigate individual claim risks and can invest in a financial market consisting of a risk-free asset, a risky asset where the instantaneous rate of investment return follows an Ornstein-Uhlenbeck process which can reflect the changes of bull market and bear market. The optimal reinsurance strategy has a non-trivial structure which is distinguished from the conventional proportional and excess-of-loss reinsurance strategies. Furthermore, we derive the optimal reinsurance and investment strategies under the variance premium principle and expected value principle. In addition, we give another model which considers the correlation between risk model and financial market under the expected value principle. Finally, numerical analyses are provided to analyze the effects of model parameters on the optimal strategies under different cases.