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Interest-Rate Changes and the Value of a Non-life Insurance Company

Published online by Cambridge University Press:  17 April 2015

Thomas Albrecht  and
Allianz AG
Thomas Albrecht
Affiliation:
Treffauerstr. 38, D-81373 München, thomas.albrecht@allianz.com, Tel. +49 89 3800 7481, Fax +49 89 3800 19422
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Abstract

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How does a change in the risk-free interest-rate affect the value of a non-life insurance company or portfolio? Risk managers typically argue that there should be little impact as long as assets and liabilities are properly matched. However, the risk-management perspective focuses on existing assets and liabilities, while neglecting the value of future business potential. This paper argues that interest-rate changes can have a significant impact on the appraisal value of a non-life insurance company, even if assets and liabilities are matched. This impact can be positive as well as negative, depending on the underlying parameters. Relevant parameters include reserving intensity, combined ratio, business growth-rate, asset allocation, risk-capital relative to premium income and the correlation between interest-rate and technical insurance results.

Keywords

ValuationInterest-RatesAsset-Liability-Management
Type
Workshop
Information
ASTIN Bulletin: The Journal of the IAA , Volume 33 , Issue 2 , November 2003 , pp. 347 - 364
Copyright
Copyright © ASTIN Bulletin 2003

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