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Dynamic Financial Analysis - Understanding Risk and Value Creation in Insurance

Author

Listed:
  • Peter Blum

    (Converium)

  • Michel Dacorogna

    (Converium)

Abstract

The changing business environment in non-life insurance and reinsurance has raised the need for new quantitative methods to analyze the impact of various types of strategic decisions on a company’s bottom line. Dynamic Financial Analysis («DFA») has become popular among practitioners as a means of addressing these new requirements. It is a systematic approach based on large-scale computer simulations for the integrated financial modeling of non-life insurance and reinsurance companies aimed at assessing the risks and the benefits associated with strategic decisions. DFA allows decision makers to understand and quantify the impact and interplay of the various risks that their company is exposed to, and – ultimately – to make better informed strategic decisions. In this brochure, we provide an overview and assessment of the state of the industry related to DFA. We investigate the DFA value proposition, we explain its elements and we explore its potential and limitations.

Suggested Citation

  • Peter Blum & Michel Dacorogna, 2003. "Dynamic Financial Analysis - Understanding Risk and Value Creation in Insurance," Risk and Insurance 0306002, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpri:0306002
    Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on HP A4; pages: 22 ; figures: included
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/ri/papers/0306/0306002.pdf
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    References listed on IDEAS

    as
    1. Douglas Hodes & Sholom Feldblum & Antoine Neghaiwi, 1999. "The Financial Modeling of Property-Casualty Insurance Companies," North American Actuarial Journal, Taylor & Francis Journals, vol. 3(3), pages 41-69.
    2. Kaufmann, Roger & Gadmer, Andreas & Klett, Ralf, 2001. "Introduction to Dynamic Financial Analysis," ASTIN Bulletin, Cambridge University Press, vol. 31(1), pages 213-249, May.
    3. William G. Tomek & Hikaru Hanawa Peterson, 2001. "Risk Management in Agricultural Markets: A Review," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 21(10), pages 953-985, October.
    4. Myron S. Scholes, 2000. "Crisis and Risk Management," American Economic Review, American Economic Association, vol. 90(2), pages 17-21, May.
    5. Lowe, Stephen P. & Stanard, James N., 1997. "An Integrated Dynamic Financial Analysis and Decision Support System for a Property Catastrophe Reinsurer1," ASTIN Bulletin, Cambridge University Press, vol. 27(2), pages 339-371, November.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Peter Blum & Michel Dacorogna & Lars Jaeger, 2003. "Performance and Risk Measurement Challenges For Hedge Funds: Empirical Considerations," Risk and Insurance 0311001, University Library of Munich, Germany.

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    More about this item

    Keywords

    reinsurance; dynamic financial analysis; insurance;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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    This paper has been announced in the following NEP Reports:

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