  One possible way of risk management for an insurance company is to develop an
early and appropriate alarm system before the possible ruin. The ruin is
defined through the status of the aggregate risk process, which in turn is
determined by premium accumulation as well as claim settlement outgo for the
insurance company. The main purpose of this work is to design an effective
alarm system, i.e. to define alarm times and to recommend augmentation of
capital of suitable magnitude at those points to prevent or reduce the chance
of ruin. To draw a fair measure of effectiveness of alarm system, comparison is
drawn between an alarm system, with capital being added at the sound of every
alarm, and the corresponding system without any alarm, but an equivalently
higher initial capital. Analytical results are obtained in general setup and
this is backed up by simulated performances with various types of loss severity
distributions. This provides a strategy for suitably spreading out the capital
and yet addressing survivability concerns at satisfactory level.
