Calculate The Total Asset Value Of A Company

Question

Let S_n be the total assets of an insurance company at the end of year n. Suppose that in year n the company receives premiums of c and pays claims totaling ξ_n, where ξ_n are independent with Normal (µ, σ2) distribution, where 0 < µ < c. The company is ruined if its assets fall to 0 or below. Show

P (ruin) ≤ exp(−2(c − µ)S₀/σ²)

Summary

The question belongs to Mathematics and it deals with calculation of an insurance company’s total assets.

Note: The solution is in handwritten format.

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