How Much Capital Does a Reinsurance Need?
A modern reinsurance company needs to manage its capital efficiently. The problem is that there are many views on capital, depending on the various positions of the stakeholders of the company involved. In this paper, we present a consistent way of defining capital and of managing it, taking into ac...
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| Veröffentlicht in: | Geneva papers on risk and insurance. Issues and practice 2009-04, Vol.34 (2), p.159-174 |
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| container_title | Geneva papers on risk and insurance. Issues and practice |
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| creator | Besson, Jean-Luc Dacorogna, Michel M. de Martin, Paolo Kastenholz, Michael Moller, Michael |
| description | A modern reinsurance company needs to manage its capital efficiently. The problem is that there are many views on capital, depending on the various positions of the stakeholders of the company involved. In this paper, we present a consistent way of defining capital and of managing it, taking into account the view of all stakeholders. We answer the question of how much capital is required by the business, and introduce the notion of buffer capital. This is used to reduce the likelihood of the company having to call too often on its shareholders to refurbish its capital. We show how this concept relates to the setting of return on equity objectives for the company. Capital allocation is the driver for measuring the economic performance of a business. The fixing of limits relating to capital consumption is linked to capital allocation because it preserves the diversification of the book. We advocate the use of the internal model to determine all of these parameters, and to set the stage for good enterprise risk management within the company. |
| doi_str_mv | 10.1057/gpp.2009.8 |
| format | Article |
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| identifier | ISSN: 1018-5895 |
| ispartof | Geneva papers on risk and insurance. Issues and practice, 2009-04, Vol.34 (2), p.159-174 |
| issn | 1018-5895 1554-964X 1468-0440 |
| language | eng |
| recordid | cdi_proquest_miscellaneous_20956517 |
| source | Business Source Complete; Jstor Complete Legacy; SpringerLink Journals - AutoHoldings |
| subjects | Allocations Balance sheets Business risks Business structures Capital Capital investments Capital management Capital markets Capital needs Capital requirements Corporate profits Economics and Finance Equity Finance Financial institutions Insurance Insurance premiums Investment risk Investors Policyholders Portfolio management Profitability Reinsurance Risk capital Risk Management Securities markets Shareholders Solvency Stakeholders Stockholders Studies |
| title | How Much Capital Does a Reinsurance Need? |
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