Abstract

Peer-to-Peer (P2P) risk sharing has been practiced in various forms in the financial and insurance industry. Traditional work on P2P predominantly focusses on one period problems. This talk will study dynamic extensions; both in discrete and continuous time. The design of risk-sharing strategies is based on the Pareto optimization of quadratic utilities of participants' terminal reserves. Such a framework builds a connection between portfolio optimization in the finance literature and that for risk sharing in the insurance literature. We focus on the most common form of reinsurance -- pro-rata treaties. Closed form expressions are derived, and a numerical method is proposed for related utility functions. Finally, we propose a robust extension, and solve it numerically.