Accounting Commons^™

Safe-Side Requirements In Life Insurance: A Corporate Perspective, Annamaria Olivieri, Ermanno Pitacco

Journal of Actuarial Practice (1993-2006)

Safe-side requirements concern the assumptions used to calculate premiums in relation to a set of more realistic assumptions. Roughly, safe-side requirements express the capability of premiums to generate positive margins. In a strictly actuarial framework, safe-side requirements are given in terms of some notion of expected profit, calling for assumptions that let such profit be non-negative. An expected profit of zero, however, is not a realistic aim for the insurer. We investigate the notion of conservative assumptions by adopting a unconventional approach. Our focus is the management of the financial resources coming both from premiums and from shareholders' capital. This …