pricing in insurance

[11] Alternative Risk Funding Solutions for Financial Risk - Part II

By Harry Niederau | August 22, 2009

Part II (to be published soon)

In this contribution we consider alternative risk funding solutions for pension funds as typical representatives of institutions with a strong risk exposure on the fixed asset side. The focus is on financial risk rather than the traditionally insurable part of pension fund risk. We put forward a simple insurance concept against stock market risk, in which the pensions funds and their shareholders are the insureds, the cells of an assumed rent-a-captive facility reinsure part of the the pension funds' exposure and a defined excess portion of asset risk is transferred to the reinsurance market in the wider sense, i.e. including the capital or derivative/OTC market. In particular we develop a dual trigger concept incorporating both an absolute and a relative means of capital protection. The latter benchmarks the investment strategy of the pension funds by means of the (algorithmic) trading vehicle of the core company against a direct "shadow investment" in the Dow Jones Industrial Average.

Topics: macro-economics, pricing in insurance | | Comments

[10] Alternative Risk Funding Solutions for Financial Risk - Part I

By Harry Niederau | June 4, 2009

Part I

In this post we continue the discussion launched in previous posts, i.e. [3] and [9], highlighting the limitations of diversification in the sense of Makrowitz but also those of employing derivative instruments (e.g. Put options) as stop loss type of insurance when stock markets contract. We stress that the balance sheets of organisations with a business related overhead in fixed asset positions, such as life (re-)insurers or pension funds, are affected most by the latter limitations. This sets the stage for discussing possible alternative solutions in the following posts.

Topics: pricing in insurance | | Comments

[7] Update on: quasi risk-neutral pricing

By Harry Niederau | February 3, 2009

The paper on Quasi Risk-Neutral Pricing in Insurance has been accepted for publication in the Astin Bulletin. Details concerning the date of appearance will be given in time.

Topics: pricing in insurance | | Comments

[5] Quasi Risk-Neutral Pricing - Update

By Harry Niederau | July 12, 2008

The paper <<quasi risk-neutral pricing in insurance>>, submitted to the Astin Bulletin at mid November 2007, has passed the initial referee screening and is now under revision.

Topics: pricing in insurance | | Comments

[3] Dow Jones: Do we understand it?

By Harry Niederau | February 24, 2008

Project set-up and preliminary results.

Relating to the Dow Jones Industrial Average (DJIA) we allude to a macro-economic measure of risk-aversion in the sense of Pratt-Arrow and a leading indicator of switches in long-term trends of the DJIA in normalized scale. Albeit assumed as a fact in financial media, we scrutinize whether or not Dow titans outperform T-bonds on an expected return basis long-term. These subject matters are embedded in a context of discussing a new species of long-term investment products with application for instance to provision of old age.

Topics: macro-economics, pricing in insurance | | Comments