Abstract:

The frequency of natural disasters, exacerbated by climate and environmental changes, poses severe challenges to insurance companies' risk management. Therefore, it is crucial to explore optimal investment and reinsurance strategies for insurance companies when facing catastrophic risks such as natural disasters. This paper innovatively integrates two factors, catastrophe bond issuance and model uncertainty, into traditional research on optimal investment-reinsurance strategies. By employing stochastic control theory and dynamic programming methods, the paper derives analytical solutions for optimal investment-reinsurance-catastrophe bond issuance strategies. Through numerical simulation analysis, it reveals the dynamic characteristics of optimal investment-reinsurance strategies after insurance companies issue catastrophe bonds. Simultaneously, it discusses the sensitivity and economic impact of key parameters such as market correlation and ambiguity aversion coefficients on strategy selection. The research results indicate that catastrophe bond issuance/purchase can effectively substitute for reinsurance, with a decrease in reinsurance purchases as the issuance/purchase volume increases. Enhanced correlation between catastrophe bonds and the insurance market prompts insurance companies to reduce venture investments and increase catastrophe bond holdings. In uncertain environments, insurance companies rely more on catastrophe bonds for risk management and tend to invest in markets with high certainty. Additionally, as capital increases, investment strategies become more conservative.

Key words: ambiguity, CAT bonds, optimal strategies, ruin probability.