The values of insurance companies under different uncertain portfolios

Knut K. Aase; Isaac Meilijson

doi:10.1007/BF00941935

The values of insurance companies under different uncertain portfolios

Knut K. Aase^*, Isaac Meilijson

^*Corresponding author for this work

School of Mathematical Sciences

Research output: Contribution to journal › Article › peer-review

Abstract

The value of an insurance company mainly depends on the premiums received in each underwriting period, the probability distribution of the accumulated claims against the company, the equity capital, and the risk-adjusted rate of return determined by the market. We analyze how the value of the company is affected by marginal changes in the underlying determinants, when there is a regulatory requirement on equity capital. The major factor we are interested in is the claims against the company in each underwriting period, which we represent by a stationary stochastic process. The existing orders for partially ranking risks do not suffice for our purpose, and new conditions are found on the risks facing the companies, for the successful ranking of the company values.

Original language	English
Pages (from-to)	147-158
Number of pages	12
Journal	GENEVA Papers on Risk and Insurance Theory
Volume	21
Issue number	2
DOIs	https://doi.org/10.1007/BF00941935
State	Published - Dec 1996

Keywords

Capital budgeting
Comparative statics
MLR-dominance
Mean preserving dominance
Stochastic dominance

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abstract = "The value of an insurance company mainly depends on the premiums received in each underwriting period, the probability distribution of the accumulated claims against the company, the equity capital, and the risk-adjusted rate of return determined by the market. We analyze how the value of the company is affected by marginal changes in the underlying determinants, when there is a regulatory requirement on equity capital. The major factor we are interested in is the claims against the company in each underwriting period, which we represent by a stationary stochastic process. The existing orders for partially ranking risks do not suffice for our purpose, and new conditions are found on the risks facing the companies, for the successful ranking of the company values.",

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KW - Comparative statics

KW - MLR-dominance

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The values of insurance companies under different uncertain portfolios

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Keywords

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