Valuation of non-life insurance under Kramer–Lundberg risk model equipped with regime-switching factor

In this paper, we delve into the dynamic Kramer–Lundberg risk model featuring a stochastic premium within the context of a Markov switching factor. This paper is motivated by the increasing demand for models that can effectively navigate economic fluctuations. Within this framework, we present a novel risk management model tailored for non-life insurance, designed to mitigate risks encountered by non-life insurance firms while bolstering their resilience and operational stability. Furthermore, we conduct a comprehensive simulation study to assess the efficacy of our proposed model by evaluating its performance against other common models. The numerical results highlight the clear superiority of our model, demonstrating its close alignment with reality and its high capability to predict changes in fluctuating economic conditions.