Shimko, David C., "The Valuation of Multiple Claim Insurance Contracts", Journal of Financial and Quantitative Analysis, Vol. 27, No. 2, (June 1992), pp. 229-246.

Abstract: This paper provides a closed form solution for the value of a multiple claim insurance contract that is subject to a deductible amount and/or an upper limit on claim. The solution is a time integral of European option prices. The model provides three important insights. First, systematic risk in insurance policies is altered in the presence of deductibles and maximum indemnity levels. Second, idiosyncratic risk affects policy valuation and the required rates of return on underwriting portfolios. Finally, contrary to traditional actuarial intuition, changes in the risk-free interest rate may either increase or reduce policy values.

This paper is republished as Ch. 3 in...