Optimal dividend and investing control of an insurance company with higher solvency constraints

This paper considers the optimal control problem of a large insurance company under a fixed insolvency probability. The company controls proportional reinsurance rate, dividend pay-outs and investing process to maximize the expected present value of the dividend pay-outs until the time of bankruptcy. This paper aims at describing the optimal return function as well as the optimal policy. As a by-product, the paper theoretically sets a risk-based capital standard to ensure the capital requirement that can cover the total risk.

► We establish optimal investing control of an insurance company. ► The control problem is under some safe conditions.► The company controls proportional reinsurance rate and dividend. ► We derive the optimal return function and optimal policy. ► A risk-based capital standard is given.