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- Title
Insurance Pricing, Reserving, and Performance Evaluation Under External Constraints on Capitalization and Return on Equity.
- Authors
Ulm, Eric R.
- Abstract
We derive formulas for calculating the premiums that should be charged on policies in a discounted cash flow model with tax reserves and required assets that are determined by regulation. We also determine the unique division of required assets into 'reserves' and 'capital' that allows the product profitability to be correctly evaluated. That is, the profit after capital charges is zero if the product achieves the return assumed in pricing. We illustrate the concepts using whole life insurance and guaranteed minimum death benefit examples.
- Subjects
INSURANCE premiums; PREMIUMS (Retail trade); CASH flow; RESERVES (Accounting); ASSETS (Accounting); CAPITAL; PROFITABILITY; SURVIVORS' benefits
- Publication
Journal of Risk & Insurance, 2012, Vol 79, Issue 2, p541
- ISSN
0022-4367
- Publication type
Article
- DOI
10.1111/j.1539-6975.2011.01432.x