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Optimal Dividend Strategies: Some Economic Interpretations For The Constant Barrier Case, Maite Marmol, M. Merce Claramunt, Antonio Alegre
Optimal Dividend Strategies: Some Economic Interpretations For The Constant Barrier Case, Maite Marmol, M. Merce Claramunt, Antonio Alegre
Journal of Actuarial Practice (1993-2006)
We consider the surplus process of a non-life insurance portfolio with a dividend component represented by a constant dividend barrier strategy. The optimal dividend barrier is known when individual claim amounts follow an exponential distribution. This result for the optimal dividend barrier is used to develop combinations of the levels of the insurer's initial surplus and of the barrier which, under certain economic and financial criteria, can be regarded as optimal.
Asset Allocation In Investing To Meet Liabilities, Anthony Dardis, Vinh Loi Huynh
Asset Allocation In Investing To Meet Liabilities, Anthony Dardis, Vinh Loi Huynh
Journal of Actuarial Practice (1993-2006)
We present some rudimentary concepts on asset/liability management and describe an approach to asset allocation modeling for institutions that invest to meet liabilities. The traditional risk/reward framework of financial economics is used as a starting pOint. The definitions of risk and reward are then refined with regard to the institution under consideration. A simple model of a U.S. life office is examined. We assume that the only investments available are domestic stocks and long-dated government bonds. Stochastic simulation is used to create a large number of future investment scenarios using historical total return data for these asset classes. The ability …
Life Insurer Risk-Based Capital: An Option Pricing Approach, Samuel H. Cox, Arthur M.B. Hogan
Life Insurer Risk-Based Capital: An Option Pricing Approach, Samuel H. Cox, Arthur M.B. Hogan
Journal of Actuarial Practice (1993-2006)
This paper uses an option pricing framework to estimate life insurer risk-based capital. Stock market data and statutory asset and liability data are used to calculate the implied level of statutory risk-based capital for each of 18 insurers. We calculate the level of risk-based capital required to avoid subsidy from the guaranty fund. Our results suggest that less capital is required than that required under the New York actuarial risk-based capital formula. Firm rankings, however, are similar under both methods, although the methods are not directly comparable. We also determine the level of capital required if the subsidy provided to …