An Approach to Evaluating Asset Allocation Strategies for Property/Casualty Insurance Companies

This paper is intended to help managers of property/casualty insurance companies understand the importance of evaluating the asset allocation decision making process within the context of the entire insurance company operations. It addresses the important steps and considerations that go into this process while avoiding technical discussions about the details of the models that make up the process. Although the approach might be considered idealistic, the tools and models discussed in this paper are currently available to the property/casualty insurance industry. In fact, there are a number of systems currently being used by property/casualty insurance companies that are attempting to do similar analysis to that discussed in this paper. Further insights and capabilities will undoubtedly be gained though the ongoing research in the area of dynamic financial analysis. This paper is predicated on the premise that it is only by making decisions in the context of the whole that the insurance industry can avoid the mistakes attributable to the parts.