scholarly journals Simulation model of the insurance company management in market conditions

2021 ◽  
Author(s):  
Lesya Buiak ◽  
Kateryna Pryshliak ◽  
Oksana Bashutska
Keyword(s):  
Systems Analysis ◽  
Investment Strategy ◽  
Insurance Companies ◽  
Insurance Company ◽  
Mathematical Methods ◽  
Market Conditions ◽  
Optimal Decisions ◽  
Econometric Methods ◽  
Insurance Portfolio ◽  
The Subject

The article is devoted to the study of the financial mechanism and features of insurance companies and the development of economic and mathematical models for finding quantitative parameters of management of an insurance company in market conditions. The object of research is the activity of insurance companies of Ukraine. The subject of research is economic and mathematical methods and models in the system of optimal management of the insurance company in market conditions. Scientific research was conducted using the following methods: methods of systems analysis, econometric methods, methods of probability theory and mathematical statistics, simulation and stochastic modeling. The developed set of models allows to make optimal decisions in the conditions of unstable micro- and macroenvironment taking into account strengthening of a competition in the insurance market. The use of research results, including software to simulate the insurance company, provides flexibility in the management of pricing, cost policy, in the formation of the insurance portfolio, is a tool for choosing reinsurance and investment strategy to optimize the financial results of the insurance company.

Employers' Liability Insurance

1931 ◽  
Vol 13 (1) ◽  
pp. 1-66 ◽  
Author(s):  
Hugh W. Brown
Keyword(s):  
Common Law ◽  
Liability Insurance ◽  
Insurance Companies ◽  
Insurance Company ◽  
Insurance Policy ◽  
Home Office ◽  
The Subject ◽  
Insurance Business ◽  
The Law ◽  
Workmen's Compensation

SynopsisUnder Common Law an employer has always been liable to his workmen for his own personal negligence, but it was not until 1897 that there was enacted the first of a series of Workmen's Compensation Acts which introduced a remarkable change in the law, inasmuch as the workman was given a statutory right to compensation for accident without requiring him to prove any negligence whatever.The evolution of the law relating to Workmen's Compensation is traced through the successive Acts of Parliament, and the provisions of the Workmen's Compensation Act 1925, which codifies the law on the subject, are summarised so far as they relate to the liability covered by an Insurance Policy. Under the Act the employer is liable for personal injury to his workmen by accident “arising out of and in the course of” the employment or by certain scheduled industrial diseases.An Insurance Policy covers the liability at Common Law and under the Employers' Liability Act 1880 as well as under the Workmen's Compensation Acts, and in addition makes the Insurance Company responsible for the cost of defending claims. The injured workman may have to consider whether he is likely to recover a larger sum by way of damages than he would receive in compensation by arbitration proceedings under the Workmen's Compensation Acts, and he can then elect which course to take.A description is given of the Returns of Compensations made by Insurance Companies to the Home Office on behalf of the employers in certain selected industries as required by the Workmen's Compensation Act 1925.The requirements of the Assurance Companies Act 1909 relating to Employers' Liability Insurance business are stated. In the Annual Returns to the Board of Trade under this Act, an Actuarial Valuation of the Outstanding Claims that have been in existence for five years or more is called for on an annuity basis, but no regulations are laid down for estimating the Liability in respect of Outstanding Claims of shorter duration. The present method is to take each of such claims and after considering the facts—nature of injury, rate of compensation, etc.—to make the best possible estimate of the ultimate cost to the Insurance Company. Later developments of the injury, however, may cause such estimate to be wide of the amount which the Company is called upon to pay. A plea is advanced for an investigation into the liability in respect of Outstanding Claims, in the hope that it may be found possible to arrive at average factors which could be used, with a suitable grouping of the Claims, to determine the Liability under the non-fatal Outstanding Claims from the first occasion of their becoming outstanding. When there is no recognised method based on past experience of making such an estimate, judgment may be influenced by factors not solely relevant to the ascertainment of the liability.All the leading Offices transacting Employers' Liability Insurance business are members of the Accident Offices Association. This Association was formed after the passing of the Workmen's Compensation Act 1906, by which the scope of workmen's compensation was widely extended. The Association controls the rates and policy conditions of the Tariff Offices, but as the regulations are in great measure confidential, detailed information can only be given regarding what is already common knowledge.A further step was taken in Government supervision of Insurance Companies by the Agreement made in 1923 between the Home Office and the Accident Offices Association, the effect of which is to limit to 37½% the expenses and profits in respect of the combined figures of the members of the Association.The trend of probable future legislation as recommended by the Departmental Committee in the Insurance Undertakings Bill is described, and the questions of Compulsory Insurance and State Insurance are touched upon.An account is given of an Undertaking made recently by the Accident Offices Association to furnish the Government with workmen's compensation statistics in connection with a Home Office Scheme of enquiry into the Incidence and Causation of Accidents.The subject is so extensive that it has only been possible to deal with it in broad outline, but in conclusion reference is made to various aspects that could with advantage be expanded.

scholarly journals An internal model for measuring premium risk when determining solvency of non-life insurers

2018 ◽  
Vol 63 (217) ◽  
pp. 99-127
Author(s):  
Jelena Kocovic ◽  
Marija Koprivica
Keyword(s):  
Internal Model ◽  
Fixed Ratio ◽  
Insurance Companies ◽  
Capital Requirement ◽  
Insurance Company ◽  
Life Insurance Company ◽  
Life Insurers ◽  
Insurance Portfolio ◽  
Compound Distribution ◽  
Premium Risk

Under contemporary dynamic approaches the solvency of insurance companies is determined by measuring the risks that threaten their business. This paper presents an internal model for measuring premium risk when evaluating the solvency of non-life insurers. The solvency capital requirement is calculated on the basis of a compound distribution of insurance portfolio aggregate claim amount, resulting from combining separately modelled claim frequency and severity distributions, with prior verification of earned technical premium sufficiency. The practical application of the model is illustrated by a case study of a specific non-life insurance company in Serbia. The research findings show that the dynamic model of premium risk measurement results in larger capital requirement and contributes to a more reliable assessment of insurers? solvency than the static model. This proves the inadequacy of the existing fixed ratio model and stresses the need for changes in the current methodology of determining the solvency of insurance companies in Serbia.

scholarly journals ANALYSIS OF THE MAIN INDICATORS OF THE INSURANCE COMPANY’S FINANCIAL STABILITY USING SIMULATION MODELLING

2019 ◽  
Keyword(s):  
Simulation Model ◽  
Life Insurance ◽  
Financial Stability ◽  
Simulation Modelling ◽  
Insurance Companies ◽  
Insurance Fund ◽  
Insurance Company ◽  
Life Insurance Company ◽  
Mathematical Methods ◽  
Financial Condition

The purpose of insurance is to accumulate funds to fulfill obligations to its clients, as well as to invest further in the expansion of insurance activities and the development of the country's economy. The success of insurance companies depends to a large extent on their financial status, that is, financial stability and solvency. The financial condition of an insurance company is characterized by the indicators that describe its ability to develop and successfully operate in a competitive market environment. The stable financial condition of the insurer is a guarantee of development in the conditions of the market economy and an insurance of the stability of the development of the insurance market in the country. The purpose of this research is to assess the financial stability of a non-life insurance company and to analyze the main factors affecting it with the use of computer simulation modelling. The simulation model covers the main processes of the non-life insurance company and is based on the application of financial analysis methods, economic and mathematical methods, and modern simulation technologies. Based on the simulation model, the financial stability of the insurance company is assessed, namely the analysis of the insurance company’s profitability, income, expenses, indicators of profitability; the coefficients of financial stability of the insurance fund and the level of insurance reserves for the analysis of the adequacy of the insurance fund are calculated; the actual and normative solvency margin is calculated for controlling the fulfillment of solvency conditions; the solvency ratio (autonomy) is calculated; the equity ratio is calculated and an analysis of the adequacy of equity is carried out. The developed simulation model can be used to increase the level of planning and analytical reporting, to improve methods of conducting insurance operations, to plan and forecast the activity, and to increase the validity of managerial decisions.

A NEW MULTIVARIATE ZERO-INFLATED HURDLE MODEL WITH APPLICATIONS IN AUTOMOBILE INSURANCE

2022 ◽  
pp. 1-24
Author(s):  
Pengcheng Zhang ◽  
David Pitt ◽  
Xueyuan Wu
Keyword(s):  
Model Performance ◽  
Insurance Companies ◽  
Hurdle Model ◽  
Automobile Insurance ◽  
Insurance Company ◽  
Computational Statistics ◽  
Count Models ◽  
Insurance Portfolio ◽  
Insurance Business ◽  
One Year

Abstract The fact that a large proportion of insurance policyholders make no claims during a one-year period highlights the importance of zero-inflated count models when analyzing the frequency of insurance claims. There is a vast literature focused on the univariate case of zero-inflated count models, while work in the area of multivariate models is considerably less advanced. Given that insurance companies write multiple lines of insurance business, where the claim counts on these lines of business are often correlated, there is a strong incentive to analyze multivariate claim count models. Motivated by the idea of Liu and Tian (Computational Statistics and Data Analysis, 83, 200–222; 2015), we develop a multivariate zero-inflated hurdle model to describe multivariate count data with extra zeros. This generalization offers more flexibility in modeling the behavior of individual claim counts while also incorporating a correlation structure between claim counts for different lines of insurance business. We develop an application of the expectation–maximization (EM) algorithm to enable the statistical inference necessary to estimate the parameters associated with our model. Our model is then applied to an automobile insurance portfolio from a major insurance company in Spain. We demonstrate that the model performance for the multivariate zero-inflated hurdle model is superior when compared to several alternatives.

On the Proper Method of Estimating the Liability of a Life Insurance Company under its Policies

1870 ◽  
Vol 15 (6) ◽  
pp. 411-432 ◽  
Author(s):  
Thomas B. Sprague
Keyword(s):  
Life Insurance ◽  
Insurance Companies ◽  
Insurance Company ◽  
Life Insurance Company ◽  
Inverse Process ◽  
Proper Method ◽  
Considerable Length ◽  
The Subject

Some years ago I read before the Institute a paper bearing on this subject (see Journal, vol. xi., p. 90) in which I examined at considerable length the method of valuation which has been on various occasions so strongly advocated by Mr. Tucker, and which is denominated by him the “reinsurance method.” This term, however, appeared to me unsuitable, and I termed the method the “hypothetical method” of valuation; because the sums assured and the premiums are valued by means of a hypothetical table of the values of reversions and annuities, deduced by an inverse process from the premiums actually charged by the office. In that paper I compared Mr. Tucker's method with the net-premium method of valuation, and gave my reasons for believing the latter to be not only greatly superior to the former, but the method that should be generally employed. Subsequent consideration has however satisfied me that the net-premium method of valuation is also open to very serious objections, and that it is not applicable in all cases; and I propose on the present occasion, first to point out some of these objections, and then to consider briefly what method of valuation should be followed when the net-premium method is inapplicable. The subject however is a very wide one; and the present paper must be considered rather as a contribution to the discussion of a question that is all-important to those who have the responsibility of advising as to the liabilities of Life Insurance Companies, than as claiming to be itself a complete essay on the subject.

Abstract: Alternative Investment Strategies for the Issuers of Equity-Linked Life Insurance Policies with an Asset Value Guarantee

1977 ◽  
Vol 12 (4) ◽  
pp. 651-652 ◽  
Author(s):  
Michael J. Brennan ◽  
Eduardo S. Schwartz
Keyword(s):  
Option Pricing ◽  
Life Insurance ◽  
Mutual Fund ◽  
Investment Strategy ◽  
Insurance Companies ◽  
Recent Theory ◽  
Investment Strategies ◽  
Insurance Company ◽  
Insurance Policy ◽  
Asset Value

An equity-linked life insurance policy with an asset value guarantee (ELPAVG) is an insurance policy whose benefit payable on death or at maturity consists of the greater of some guaranteed amount and the value of a reference portfolio which is defined by the deemed investment of a predetermined component of the policy premium in a portfolio of common stocks or mutual fund–the reference fund. In an earlier paper we demonstrated that the benefit payable under an ELPAVG could be decomposed into the known guaranteed amount and an immediately exercisable call option to purchase the reference portfolio for an exercise price equal to the guaranteed amount. The principles of the option pricing model were then employed to derive the equilibrium premium for both a single premium ELPAVG contract and a periodic premium contract. It was further noted that the hedging arguments, which are the core of most of the recent theory of option pricing, could be employed to derive an investment strategy for the insurance company which would eliminate the risks associated with the sale of ELPAVGs: this is an important result, for ELPAVGs may pose a significant threat to the solvency of insurance companies since the risks of loss under different contracts are not independent, but are commonly related to the overall performance of the reference fund. Actuaries have responded to this threat by attempting to determine a level of reserves sufficient to reduce the probability of ruin to an acceptable level. On the other hand, adoption of the riskless investment strategy in theory eliminates the need to hold any reserves except against mortality risk.

scholarly journals Formation of the optimal portfolio of insurer’s services of the voluntary types of insurance

2016 ◽  
Vol 7 (1) ◽  
pp. 45-51 ◽  
Author(s):  
Valentyna Levchenko ◽  
Myroslav Ostapenko
Keyword(s):  
Portfolio Optimization ◽  
Optimization Model ◽  
Optimization Problem ◽  
Optimal Portfolio ◽  
Optimal Structure ◽  
Insurance Companies ◽  
Insurance Company ◽  
Strategic Decisions ◽  
General Insurance ◽  
Insurance Portfolio

The article studies the possibility of using optimization modelling to form the optimal structure of insurance services’ portfolio of insurance companies. Based on the data of net insurance payments and profitability of the voluntary types of insurance in 2005-2015, the authors conducted their analysis according to the possibility to be included in the general insurance portfolio of the insurance company. The optimization model is based on the approach developed by G. Markowitz. The formation of insurance services portfolio is conducted by solving the optimization problem to maximize the portfolios’ profitability or to minimize the portfolio’s risks. The obtained results can be used in making strategic decisions by the management regarding the development of insurance companies. Keywords: insurance company, insurance service, insurance portfolio, portfolio optimization

scholarly journals THE PROBLEMS OF THE DOMESTIC REINSURANCE DEVELOPMENT IN CONDITIONS OF FINANCIAL INSTABILITY

2021 ◽  
Vol 3 (38) ◽  
pp. 154-161
Author(s):  
O. Stashchuk ◽  
O. Borysyuk ◽  
M. Datsyuk-Tomchuk
Keyword(s):  
Financial Stability ◽  
Rapid Development ◽  
Jel Classification ◽  
Insurance Companies ◽  
Financial Resources ◽  
Financial Instability ◽  
Insurance Company ◽  
Insurance Portfolio ◽  
The Individual ◽  
Insured Event

Abstract. Financial instability stems from the excessive volatility in the financial markets, the weakness of financial institutions and the inability of financial sector companies to fulfill their obligations, and it is no exception to insurance companies that do not have sufficient financial resources to reinsure. In modern conditions, reinsurance provides stability to the development of the insurers and is one of the most important tools that provides effective protection against various natural, man-made and other risks. The lack of financial resources of the insurance companies objectively determines the limitations of their ability to insure large risks. Reinsurance enables the insurance companies, by attracting funds from other insurers, to ensure the honest fulfillment of their obligations to insure payment at the onset of an insured event, while maintaining the stability of their financial situation. Admission to the insurance of expensive objects is dangerous for the individual insurer’s financial stability through the coverage of losses in the insured event. Admission to the insurance of expensive objects is dangerous for the individual insurer’s financial stability through the coverage of losses in the insured event. The need for reinsurance is due, among other things, to regulatory requirements for capital and assets and provides tools for rapid development of the insurance portfolio. Simultaneously reinsurance enables to protect the insurance portfolio from the influence on it of a series of large insurance risks, including catastrophic, so that the payment of insurance compensations on them does not pose a heavy burden on the one insurance company, but is carried out collectively by all participants in reinsurance. As a result, reinsurance allows you to take insurance risks that far outweigh the insurer’s own financial resources. Thus, the reinsurance system is a guarantee of financial stability of any insurance company, providing protection of its capital, and the basis for increasing the volume and quality of insurance services. In Article, the essence and significance of reinsurance in the conditions of globalization of the world economy were considered, as well as analysis of the main tendencies of the domestic reinsurance market development and the problems of its development in Ukraine were revealed. Keywords: insurance, financial instability, volatility, financial market, reinsurance, commission remuneration. JEL Classification E44, G20, G22, O16 Formulas: 0; fig.: 2; tabl.: 4; bibl.: 15.

On the Causes of Insolvency in Life Insurance Companies, and the best means of detecting, exposing and preventing it

1877 ◽  
Vol 20 (4) ◽  
pp. 291-297 ◽  
Author(s):  
T. B. Sprague
Keyword(s):  
Life Insurance ◽  
British Association ◽  
Insurance Companies ◽  
Insurance Company ◽  
Life Insurance Company ◽  
The Subject

If, a few years ago, a paper had been offerd to the British Association on the subject ov the insolvency of life insurance companies, it woud probably hav been met with the objection that it was ov too theoretical a character. No life insurance company in the contry had ever been knoen to becom insolvent, and ther was no reason to anticipate that such a catastrofy woud ever occur. The well knoen remark ov the late Prof. De Morgan miht probably hav been quoted, that ther is nothing at all comparabl in point ov security with a well establisht and prudently conducted life insurance company.

scholarly journals Dynamic surplus optimization with performance- and index-linked liabilities

2021 ◽  
Author(s):  
Sascha Desmettre ◽  
Markus Wahl ◽  
Rudi Zagst
Keyword(s):  
Optimal Investment ◽  
Investment Strategy ◽  
Insurance Companies ◽  
Investment Strategies ◽  
Insurance Company ◽  
Expected Return ◽  
Close Link ◽  
Closed Form Solutions ◽  
Risky Investment ◽  
The Impact

AbstractThe increasing importance of liability-driven investment strategies and the shift towards retirement products with lower guarantees and more performance participation provide challenges for the development of portfolio optimization frameworks which cover these aspects. To this end, we establish a general and flexible terminal surplus optimization framework in continuous time, allowing for dynamic investment strategies and stochastic liabilities, which can be linked to the performance of an index or the asset portfolio of the insurance company. Besides optimality results in a fairly general surplus optimization setting, we obtain closed-form solutions for the optimal investment strategy for various specific liability models, which include the cases of index-linked and performance-linked liabilities and liabilities which are completely or only partially hedgeable. We compare the results in numerical examples and study the impact of the performance participation, unhedgeable risk components, different ways of modeling the liabilities and the relative risk aversion parameter. We find that performance- or index-linked liabilities, which provide a close link between the wealth of the insurance company and its liabilities, allow for a higher allocation in the risky investment. On the other hand, unhedgeable risks reduce the allocation in the risky investment. We conclude that, aiming at a high expected return for the policy holder, insurance companies should try to connect the performance of insurance products closely to the wealth and minimize unhedgeable risks.

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