Dynamic Portfolio Management for Property and Casualty Insurance

Giorgio Consigli (), Massimo di Tria (), Michele Gaffo (), Gaetano Iaquinta (), Vittorio Moriggia () and Angelo Uristani ()
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Giorgio Consigli: University of Bergamo
Massimo di Tria: Allianz Group, AIM
Michele Gaffo: Allianz Investment Management, Allianz Group
Gaetano Iaquinta: Weierstrass Institute for Applied Analysis and Stochastics
Vittorio Moriggia: University of Bergamo
Angelo Uristani: University of Bergamo

Chapter Chapter 5 in Stochastic Optimization Methods in Finance and Energy, 2011, pp 99-124 from Springer

Abstract: Abstract Recent trends in the insurance sector have highlighted the expansion of large insurance firms into asset management. In addition to their historical liability risk exposure associated with statutory activity, the growth of investment management divisions has caused increasing exposure to financial market fluctuations. This has led to stricter risk management requirements as reported in the Solvency II 2010 impact studies by the European Commission. The phenomenon has far-reaching implications for the definition of optimal asset–liability management (ALM) strategies at the aggregate level and for capital required by insurance companies. In this chapter we present an ALM model which combines in a dynamic framework an optimal strategic asset allocation problem for a large insurer and property and casualty (P&C) business constraints and tests it in a real-world case study. The problem is formulated as a multistage stochastic program (MSP) and the definition of the underlying uncertainty model, including financial as well as insurance risk factors, anticipates the model’s application under stressed liability scenarios. The benefits of a dynamic formulation and the opportunities arising from an integrated approach to investment and P&C insurance management are highlighted in this chapter.

Keywords: Property and casualty insurance; Asset–liability management; Multistage stochastic programming; Insurance liabilities (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1007/978-1-4419-9586-5_5

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