A Model For Calculating Minimum Surplus Requirements [Review of Paper]

Required capital and surplus has been a much debated problem for many years. Subjective factors, such as the caliber of management, ownership relations, underwriting standards, and future profitability of the company, have dominated such discussions. The quantifiable elements of this problem are numerous and extremely complex for the large insurance company. However, with the advent of captive insurance companies and formalized self-insurance programs in recent years, this age-old problem is at issue again for these new insurance mechanisms. In his paper, Mr. Finger develops a mathematical model and a foundation for analysis of this renewed question. This reviewer has concentrated his discussions of this paper on particular points worthy of note.