Hostname: page-component-848d4c4894-ndmmz Total loading time: 0 Render date: 2024-05-16T22:39:58.685Z Has data issue: false hasContentIssue false
  • English
  • Français

Modelling the Impact of Reinsurance on Financial Strength

Published online by Cambridge University Press:  10 June 2011

S.M. Coutts  and
T.R.H. Thomas
S.M. Coutts
Affiliation:
International Actuarial Consultants, 65 New Cavendish Street, London, W1M 7RD, U.K. Tel: +44 (0)20 7636 4880; Fax: +44 (0)20 7636 4850; E-mail:stewart@stewartcoutts.demon.co.uk
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper develops the Daykin et al (1994) asset/liability model to examine specifically the effects of different reinsurance programmes on the capital of a direct insurance company. By modelling the gross premiums and claims separately from the impact of reinsurance on them, it is possible to examine directly the effects of different reinsurance programmes on a company's expected performance just as easily as changes in asset mix or business volumes. The paper goes on to discuss the necessary assumptions to be built into such a model, and then gives a worked example. The emphasis of the paper is on management reporting rather than on mathematical detail.

Keywords

General InsuranceReinsurance ProgrammesCapital at RiskManagement Reports
Type
Sessional meetings: papers and abstracts of discussions
Information
British Actuarial Journal , Volume 3 , Issue 3 , 01 August 1997 , pp. 583 - 653
Copyright
Copyright © Institute and Faculty of Actuaries 1997

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Actuarial Advisory Committee to the Naic Property & Casualty Risk-Based Capital Working Group (Hartman, D.G., BralThwaite, P., ButslC, R.P., Feldblum, S., Fitzgibbon, W.J., Flynn, D.P., Furst, P.A., Kaufman, A.M., Lowe, S.P., Lyons, D.K., Mccarter, M.G. & Nelson, O.A.) (1992). Property-casualty risk-based capital requirements—a corrtual framework. Casualty Actuarial Society Forum, Spring 1992, 211–280.Google Scholar
Bolton, C.G., Button, A.D., Carter, T.D., Leitch, K.A., Pettengell, CT., Pitt, H.R. & Webb, P.J. (1995). Household insurance working party report. General Insurance Convention, Bournemouth, October 1995, 43–75.Google Scholar
Brown, M. & Galitz, L.C. (1981). The ASIR System. User's Manual (2nd edition). Institute of European Finance.Google Scholar
Bulmer, J.R., Byrne, P., Green, P.A.J. & Rodriguez, R.A. (1996). Correlations between asset variables and liability variables. General Insurance Convention, Stratford-upon-Avon, October 1996, 25–46.Google Scholar
Cadbury Sir, Adrianet al. (1992). Report of the Committee on the financial aspects of corporate governance. Gee & Co. Ltd.Google Scholar
Christofides, S., Cowley, R.H.S., Iloenyosi, C., Lowe, J.A., Smith, A.D. & Tobey, D. (1996). GISMO (General Insurance Stochastic Model Office)—Short-term modelling for management decisions. General Insurance Convention, Stratford-upon-Avon, October 1996, 55–99.Google Scholar
Coutts, S.M. & Devitt, E.R.F. (1986). The assessment of the financial strength of insurance companies—a generalised cash flow model. Financial Models of Insurance Solvency. Kluwer Academic Publishers, 1–37.Google Scholar
Coutts, S.M. & Devitt, E.R.F. (1988). Simulation models and the management of a reinsurance company. Transactions of the International Congress of Actuaries, 1, 109–17.Google Scholar
Coutts, S.M. & Thomas, T.T H. (1997). Capital and risk and their relationship to reinsurance programmes. To be presented to the Casualty Actuarial Society.Google Scholar
Daykin, CD., Bernstein, G.D., Coutts, S.M, Devitt, E.R.F., Hey, G.B., Reynolds, D.I.W. & Smith, P.D. (1987). Assessing the solvency and financial strength of a general insurance company. J.I.A. 114, 227–310.Google Scholar
Daykin, C.D. & Hey, G.B. (1990). Managing uncertainty in a general insurance company. J.I.A. 117, 173–278.Google Scholar
Daykin, C.D., Pentikäinen, T. & Pesonen, M. (1994). Practical risk theory for actuaries (1st Edition). Chapman and Hall, London.Google Scholar
Hooker, N.D., Bulmer, J.R., Cooper, S.M., Green, P.A.G. & Hintó, N. P. H. (1995). Risk-based capital in general insurance. B.A.J. 2, 265–308.Google Scholar
Lowe, S.P. & Stanard, J.N. (1996). An integrated dynamic financial analysis and decision support system for a property catastrophe reinsurer. Casualty Actuarial Society Forum, 89–118.Google Scholar
Lloyd's of London (1995). Risk-based capital for Lloyd's: a consultative document.Google Scholar
Sanders, D.E.A., Grealy, P.F., Hitchcox, A.N., Magnusson, T., Manjrekar, R., Ross, J.G., Shepley, S.M. & Waters, L.F. (1995). Pricing in the London Market. General Insurance Convention, Bournemouth, October 1995, 103–213.Google Scholar