Technical Note—Insurance Exposure and Investment Risks: A Comment on the Use of Chance-Constrained Programming

Abstract

This note criticizes the chance-constrained programming model suggested by Thompson, Matthew, and Li for the balancing of investment and underwriting risks of a non-life-insurance company. We show that the optimal solution derived from such a model is based on contradictory utility assumptions. Moreover, the chance-constrained programming model is more restrictive than a full mean-variance quadratic programming model, which yields the same results.