Actuarial versus Financial Pricing of Insurance

Paul Embrechts

Center for Financial Institutions Working Papers from Wharton School Center for Financial Institutions, University of Pennsylvania

Abstract: This paper grew out of various recent discussions with academics and practitioners around the theme of the interplay between insurance and finance. Some issues were:

The increasing collaboration between insurance companies and banks

The emergence of finance related insurance products, as there are catastrophy futures and options, PCS options, indexed linked policies...

The deregulation of various (national) insurance markets

The discussion around risk management methodology for financial institutions

The evolution from a more liability modelling oriented industry (insurance) to a more global financial industry involving asset-liability and risk-capital based modelling

The emergence of financial engineering as a new profession, its interplay with actuarial training and research.

Rather than aiming at giving a complete overview of the issue at hand, the author concentrates on some recent (and not so recent) developments which from a methodological point of view offer new insight into the comparison of pricing mechanisms between insurance and finance. The author views this paper very much as work in progress.

This paper was presented at the Financial Institutions Center's May 1996 conference on "

Date: 1996-05
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Citations: View citations in EconPapers (8)

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