Stochastic cooperative games in insurance

This paper shows how problems in ‘non-life’-(re)insurance can be modeled as cooperative games with stochastic payoffs. Pareto optimal allocations of the risks faced by the insurers and the insureds are determined. It is shown that the core of the corresponding insurance games is nonempty. Moreover, it is shown that specific core allocations are obtained when the zero-utility principle is used for calculating premiums. Finally, game theory is used to give a justification for subadditive premiums.