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Evaluating the effect of reinsurance contract terms
Abstracts and Reviews
87
This paper presents an overview of two approaches to pricing aggregate loss distribution problems: the lognormal model and the He&manMeyers Collective Risk Model. Applications to reinsurance pricing are then presented. Finally the paper compares results of applying these approaches to representative working excess-of-loss treaties. These comparisons suggest that the lognormal model can provide satisfactory approximations to the theoretically more appropriate Collective Risk Model when use of the latter more sophisticated procedure is not necessary due either to data limitations or the
harmonization is only a first step toward a worldwide standardization of accounting regulations. It should be added that progressing discussions on the EC Insurance Accounting Directive have led to changes in the text of this Directive. Although some items of the essay are affected, its overall message is not touched. (Author) Keywords: European Insurance Market, Accounting Principles.
influence of market conditions and negotiations. The increased efficiency of the lognonnal model can lead
E53: INVESTMENT
to greater accuracy by making judgmental estimates unnecessary in many situations. The basic lognormal model is generally applicable to pro rata treaties and working excess-of-loss treaties. A mixture of lognormal and discrete distributions is presented that may be applicable in many low mean frequency situations. Cash flow modelling is also discussed. (Author) Keyworcis: Reinsurance, Loss Sharing Provisions, Aggregate Loss Distribution.
051079 (E53) Evaluating the effect
051078 (ESl, E62) of Accounting considerations
insurance
enterprises,
on the EC Insurance Accounting Directive (Rechnungslegung der Versicherungsuntemehmen, oberlegungen zur EG-Versicherungsbilanzrichtlinie) Jannott H.K., Munich, Germany, Zeitschrifrfilr die gesamte Versicherungswissenschafl, Vol. 80, 1991, pp. 83-96. The creation of a uniform single European market means many changes for the insurance industry, also owing to the EC Directive regarding the annual accounts of insurance companies. The essay gives an overview of the most important stipulations of this Directive and analyses the significance of accounting as a factor of competition. It focuses on two problems which are essential from a German point of view, i.e. the option right of the member states to discount loss reserves and the obligation to disclose hidden investment reserve-s in the notes to the annual accounts. As OECD and UN are also working on accounting questions of multinational enterprises, the European
of reiusurance
contract
tt?llllS.
Stanard J.N., John R.T., CusuuZty Actuarial Society, Proceedings, Vol. XXWI, nr. 146,195X.), pp. l-41. In many feinsurance pricing situations it is not possible to determine a “correct” absolute price without making a large number of tenuous assumptions. Even so, in order to maximize a company’s profitability, it is important for the reinsurance actuary and underwriter to be able to choose the best contract terms among the achievable alternatives. Furthermore, being able to offer different but equivalent terms that better serve the needs of the cedent may help close an important deal. This paper measures the efficiency of contract terms by estimating the distribution of the present value of cash flows. To do this, the paper examines paid and incurred aggregate distributions as a function of time over the life of a contract. Sensitivity of the results to changes in the parameters of the underlying loss model is investigated. (Authors) Keywor&: Reinsurance, Eflcieng, Cash jlows.
(E60): SURVEYS, MISCELLANEOUS
GENERAL
051080 (E60) Scale economies and performance
AND
in the French insurance industry. Fecher F., Perelman S., Pestieau P., Department of Economics, Universiti de Liege, Belgium, Genes Papers on Risk & Insurance, Vol. 16, nr. 60, pp. 315-326.
87
This paper presents an overview of two approaches to pricing aggregate loss distribution problems: the lognormal model and the He&manMeyers Collective Risk Model. Applications to reinsurance pricing are then presented. Finally the paper compares results of applying these approaches to representative working excess-of-loss treaties. These comparisons suggest that the lognormal model can provide satisfactory approximations to the theoretically more appropriate Collective Risk Model when use of the latter more sophisticated procedure is not necessary due either to data limitations or the
harmonization is only a first step toward a worldwide standardization of accounting regulations. It should be added that progressing discussions on the EC Insurance Accounting Directive have led to changes in the text of this Directive. Although some items of the essay are affected, its overall message is not touched. (Author) Keywords: European Insurance Market, Accounting Principles.
influence of market conditions and negotiations. The increased efficiency of the lognonnal model can lead
E53: INVESTMENT
to greater accuracy by making judgmental estimates unnecessary in many situations. The basic lognormal model is generally applicable to pro rata treaties and working excess-of-loss treaties. A mixture of lognormal and discrete distributions is presented that may be applicable in many low mean frequency situations. Cash flow modelling is also discussed. (Author) Keyworcis: Reinsurance, Loss Sharing Provisions, Aggregate Loss Distribution.
051079 (E53) Evaluating the effect
051078 (ESl, E62) of Accounting considerations
insurance
enterprises,
on the EC Insurance Accounting Directive (Rechnungslegung der Versicherungsuntemehmen, oberlegungen zur EG-Versicherungsbilanzrichtlinie) Jannott H.K., Munich, Germany, Zeitschrifrfilr die gesamte Versicherungswissenschafl, Vol. 80, 1991, pp. 83-96. The creation of a uniform single European market means many changes for the insurance industry, also owing to the EC Directive regarding the annual accounts of insurance companies. The essay gives an overview of the most important stipulations of this Directive and analyses the significance of accounting as a factor of competition. It focuses on two problems which are essential from a German point of view, i.e. the option right of the member states to discount loss reserves and the obligation to disclose hidden investment reserve-s in the notes to the annual accounts. As OECD and UN are also working on accounting questions of multinational enterprises, the European
of reiusurance
contract
tt?llllS.
Stanard J.N., John R.T., CusuuZty Actuarial Society, Proceedings, Vol. XXWI, nr. 146,195X.), pp. l-41. In many feinsurance pricing situations it is not possible to determine a “correct” absolute price without making a large number of tenuous assumptions. Even so, in order to maximize a company’s profitability, it is important for the reinsurance actuary and underwriter to be able to choose the best contract terms among the achievable alternatives. Furthermore, being able to offer different but equivalent terms that better serve the needs of the cedent may help close an important deal. This paper measures the efficiency of contract terms by estimating the distribution of the present value of cash flows. To do this, the paper examines paid and incurred aggregate distributions as a function of time over the life of a contract. Sensitivity of the results to changes in the parameters of the underlying loss model is investigated. (Authors) Keywor&: Reinsurance, Eflcieng, Cash jlows.
(E60): SURVEYS, MISCELLANEOUS
GENERAL
051080 (E60) Scale economies and performance
AND
in the French insurance industry. Fecher F., Perelman S., Pestieau P., Department of Economics, Universiti de Liege, Belgium, Genes Papers on Risk & Insurance, Vol. 16, nr. 60, pp. 315-326.