Distributionally Robust Reinsurance under Robust Optimized Certainty Equivalent Risk Measure

Abstract

In this paper, we introduce a class of preference robust risk measures-\emph{robust optimized certainty equivalents} (ROCE)-which encompasses several widely used measures, including Conditional Value-at-Risk and expectiles, as special cases. Motivated by recent developments in distributionally robust optimal reinsurance (DROR), we investigate DROR problems under the ROCE risk measure and consider two prominent uncertainty sets: the mean-variance uncertainty set and the Wasserstein uncertainty set. For the mean-variance uncertainty set, we reformulate the infinite-dimensional optimization problem into a finite-dimensional one by showing that it suffices to consider three-point distributions. This leads to a unified and explicit formulation for a broad class of ROCE risk measures and offers a simplified framework that also recovers earlier results for Conditional Value-at-Risk and expectiles. For the Wasserstein uncertainty set, we also derive a tractable finite-dimensional formulation. The resulting data-driven models enable efficient computation and facilitate a systematic comparison between moment-based and Wasserstein-based uncertainty sets in the optimal deductible design. Numerical experiments are exhibited to illustrate the performance of our reformulated programs.