Abstract
This paper begins with a description of how to calculate the aggregate loss distribution for a reinsurer. We include most of the standard exposures as well as property catastrophe exposure. Next we show how this aggregate loss distribution can be used to determine the needed capital, and its cost, for a reinsurer. Finally we show how to calculate the capacity charges for individual reinsurance contracts that will allow the reinsurer to recover its cost of capital. We demonstrate the use of this methodology on some illustrative reinsurance contracts. We believe this methodology can be use in practice for most reinsurers.
Volume
Spring
Page
69-151
Year
2003
Categories
Actuarial Applications and Methodologies
Capital Management
Capital Allocation
Financial and Statistical Methods
Risk Pricing and Risk Evaluation Models
Capital Theory
Financial and Statistical Methods
Aggregation Methods
Collective Risk Model
Financial and Statistical Methods
Risk Pricing and Risk Evaluation Models
Covariance Methods
Financial and Statistical Methods
Risk Measures
Tail-Value-at-Risk (TVAR);
Publications
Casualty Actuarial Society E-Forum
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