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 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. The Geneva Papers (2009) 34, 159–174. doi:10.1057/gpp.2009.8
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 34 (2009)
Issue (Month): 2 (April)
|Contact details of provider:|| Web page: http://www.palgrave-journals.com/|
Postal:Route de Malagnou 53, CH - 1208 Geneva
Phone: +41-22 707 66 00
Fax: +41-22 736 75 36
Web page: https://www.genevaassociation.org/
More information through EDIRC
|Order Information:||Web: http://www.springer.com/finance/journal/41288/PS2|
When requesting a correction, please mention this item's handle: RePEc:pal:gpprii:v:34:y:2009:i:2:p:159-174. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.