Abstract
The investment yield used in a financial pricing model greatly affects the indicated premium. The proper investment yield depends on the target return on capital. If the target return on capital compensates for both investment risk and insurance risk, the investment yield should be the pre-tax yield expected to be earned during the lifetime of the block of business; if the target return on capital compensates for insurance risk but not for investment risk, the investment yield should be a risk-free rate.
Volume
Fall
Page
537-558
Year
2003
Categories
Actuarial Applications and Methodologies
Ratemaking
Trend and Loss Development
Investment Income
Financial and Statistical Methods
Risk Pricing and Risk Evaluation Models
ROE
Publications
Casualty Actuarial Society E-Forum
