Resolving an Insurance Allocation Problem: A Procedural Approach

In this paper we study the problem of the determination of a fair allocation in a co-insurance problem, i.e., how some insurance companies have to share the risk and the premium. We develop two procedures that produce a proportional and an equitable allocation, respectively. The procedures are applied to a real situation arising from environmental risk and the resulting allocations are compared with the classical quota share allocation and with an envy-free allocation resulting from a procedure presented in Fragnelli and Marina (Insur. Math Econ 33:75–85, 2003).