The Values of Insurance Companies Under Different Uncertain Portfolios

Knut Aase and Isaac Meilijson
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Isaac Meilijson: School of Mathematical Sciences, Raymond and Beverly Sackler Faculty of Exact Sciences, Tel-Aviv University

The Geneva Risk and Insurance Review, 1996, vol. 21, issue 2, 147-158

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. The Geneva Papers on Risk and Insurance Theory (1996) 21, 147–158. doi:10.1007/BF00941935

Date: 1996
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