IDEAS home Printed from
   My bibliography  Save this article

Measuring the Value of an Exposure: A Capital Budgeting Approach


  • Thomas A. Aiuppa
  • Lise Graham


This paper presents an alternative method for evaluating property exposures, which is one part of the risk management process. The underlying premise is that the value of a property exposure depends upon the incremental cash flows lost due to a property loss and upon the firm’s cost of capital; therefore, evaluating exposure should be carried out in a capital budgeting framework. Comparative analyses indicate that the exposure values produced by this method are often lower than those generated by other methods, which could in turn lead to lower insurance costs. Use of this method is both theoretically justified and consistent with a managerial focus on enhancing firm value.

Suggested Citation

  • Thomas A. Aiuppa & Lise Graham, 2000. "Measuring the Value of an Exposure: A Capital Budgeting Approach," Journal of Insurance Issues, Western Risk and Insurance Association, vol. 23(1), pages 1-29.
  • Handle: RePEc:wri:journl:v:23:y:2000:i:1:p:1-29

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wri:journl:v:23:y:2000:i:1:p:1-29. 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: (James Barrese). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.