Review of "Capital Allocation for Insurance Companies" by Stewart C. Myers and James R. Read Jr.

The CAS must thank Doctors Myers and Read for their intriguing article. They have developed a practical algorithm for a previously subjective problem. Regulators often require a way to measure at least the indirect cost of an insurer's Surplus in ratemaking. This article offers a well-defined solution, together with a theoretical and philosophical explanation. There are practical problems with any approach to pricing administration in a largely free economy and with the most common theoretical context for administered rate regulation. But these issues are outside of the author's scope.