Economic Regulation And Mathematical Modeling Of Insurance Product Cost Method

Background. The methodology and economic mechanisms for calculating the cost of a long-term insurance policy, which could optimize management of insurance companies in the Russian Federation, have not been developed. The research into this sphere is relevant under conditions when the functions of insurance supervisors are transferred to the Central Bank of Russia. Objectives. The priority of this economic study is to establish a scientific rationale for a transfer to the actuarial cost method of an insurance contract, as this method assures a balanced solution for long-term socio-economic problems and stability of the insurance portfolio. Results. The paper presents the theoretical provisions, methodological approaches and practical recommendations on economic regulation and management of joint business activity involving several participants (partners) in case of premature termination by one of them. This study has investigated the methodological issues of long-term insurance in the Russian Federation; it has developed the theoretical approaches to risk evaluation of premature termination of a joint project because of a participant's leaving; it has provided the scientific substantiation of and developed a conceptual economic mathematical model for calculating risks of one participant's early leaving a joint project due to external circumstances; the scientific and practical recommendations for calculation of a rate net premium have been provided using case study. Methods. To attain the objectives set out we used probability-theoretical models and actuarial mathematical methods for calculating insured components such as computational analysis, balance and statutory methods, and others. Conclusion. The developed economic mathematical model can be applied for calculating the cost of an insurance contract, both in case of a single insurance product and a combination of different insurance products, that could help improve an insurance company's liability for consequences of its rate policy. The proposed methods and tools allow taking into account potential risks at all the stages of solution development by an insurance company and avoiding adverse economic consequences in its business activities.