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Blätter der DGVFM

, Volume 27, Issue 4, pp 681–693 | Cite as

Value creation for insurers

  • Jean-François Walhin
Article

Summary

In this paper we analyze the value creation for an insurance company. We concentrate only on the underwriting risk. We use a multivariate normal random vector in order to model the underwriting risk of the insurer. Our model accounts for correlations between risks and between lines of business. We compute return on risk adjusted capital (RORAC) and economic value added (EVA) for the whole conglomerate as well as for the lines of business. When there are negative correlations, we show that it may be justified to write business with negative margins. We conclude that it is dangerous to take investment or disinvestment decisions based onRORAC orEVA per line of business. Only theEVA orRORAC for the whole conglomerate is relevant. We also analyse the effect of stop-loss reinsurance.

Keywords

Capital Allocation Stochastic Dependency Administrative Expense Financial Conglomerate Multivariate Normal Model 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Wertschöpfung für Versicherer

Zusammenfassung

In diesem Artikel wird die Wertschöpfung eines Versicherungsunternehmens analysiert. Wir konzentrieren uns ausschließlich auf das Zeichnungsrisiko. Um das Zeichnungsrisiko des Versicheres zu modellieren, wird ein multivariater, normalverteilter Zufallsvektor verwendet. Das Modell berücksichtigt Korrelationen zwischen den einzelnen gezeichneten Risiken und zwischen den Sparten. Wir berechnen den Ertrag aus dem risikoadjustierten Kapital (RORAC) und den economic value added (EVA) des Konzern sowie der einzelnen Geschäftszweige. Es wird gezeigt, dass es bei negativer Korrelation lohnenswert sein kann, Geschäft mit negativer Gewinnspanne zu zeichnen. Wir folgern, dass es schädlich ist, Investitionsentscheidungen gestützt auf denRORAC oderEVA je Geschäftszweig zu treffen. Nur derEVA oderRORAC für den Gesamtkonzern ist maßgeblich. Zusätzlich wird der Einfluss von Schadenexzedenten-Rückversicherung untersucht.

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References

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Copyright information

© DAV/DGVFM 2006

Authors and Affiliations

  1. 1.Brussels

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