next article in this issue  |
|
Document Details : Title: Cost-of-Capital Margin for a General Insurance Liability Runoff Author(s): SALZMANN, Robert , WÜTRICH, Mario V. Journal: ASTIN Bulletin Volume: 40 Issue: 2 Date: 2010 Pages: 415-451 DOI: 10.2143/AST.40.2.2061123 Abstract : Under new solvency regulations, general insurance companies need to calculate a risk margin to cover possible shortfalls in their liability runoff. A popular approach for the calculation of the risk margin is the so-called cost-of-capital approach. A comprehensive cost-of-capital approach involves the consideration of multiperiod risk measures. Because multiperiod risk measures are rather complex mathematical objects, various proxies are used to estimate this risk margin. Of course, the use of proxies and the study of their quality raises many questions, see IAA position paper [8]. In the present paper we provide a first discourse on multiperiod solvency considerations for a general insurance liability runoff. Within a chain ladder framework, we derive analytic formulas for the risk margin which allow to compare the comprehensive approach to the different proxies used in practice. Moreover, a case study investigates and answers questions raised in [8]. |
