OPTIMAL REINSURANCE AND INVESTMENT BASED ONE ECOLOGICAL AND ENVIRONMENTAL RISK MANAGEMENT PROCESS

The occurrence of ecological environmental damage, such as earthquake, flood and tsunami, pollution, often brings huge damage. Eco-environmental risk management is related to people's livelihood and national development, and it is an inevitable demand for realising regional planning and economic rationality. This paper mainly probes into the optimal reinsurance and investment strategies for ecological and environmental risk management process. Under random interest rates and inflation, insurance companies disperse the risk by purchasing proportional reinsurance, and make more profits through investments in multiple markets, including cash, zero-coupon bond, Treasury Inflation-Protected Security (TIPS), and stock. Following the dynamic programming theory, the Hamilton-Jacobi-Bellman (HJB) differential equation, which is satisfied by the remaining capital, was solved to derive the optimal reinsurance ratio, and the optimal ratio in each market of the ecological and environmental risk management process, under the optimisation criterion of maximising exponential expected utility. Moreover, the influence of parameters on the optimal reinsurance ratio and optimal investment ratio is analysed in details. The research results support the decision optimisation of insurance companies for reinsurance.