Bruno de Finetti, The Problem of Full-Risk Insurances

Luca Barone

Volume 4, Number 3, Third Quarter 2006

We examine-in its different aspects-the problem of the risk due to hedging a set of insurances and, consequently, the problem of the retention levels, i.e., of the most efficient method to reinsure a part of such insurances to reduce the risk within the desired limits, while minimizing the loss of profit. The different aspects we considered are: the risk within a single accounting period (Chap. I), the risk for the whole existing portfolio (Chap. II), the risk related to the whole future development of the firm (Chap. III). Some concluding remarks follow (Chap. IV).