Techniques for valuation a general insurance company within the framework of IAS standards: some proposals

The European Commission in Brussels has set the IAS as the unique accounting standards in order to build an integrated market of financial services within the European Union would become mandatory as from 2005 in particular for insurance companies listed on the stock exchange.

For these standards, valuation of assets and liabilities in “Fair Value” is the basic principle. However as it is difficult to assess the market value of P & C insurance contracts, the valuation of liabilities would be carried on the “Entity Specific Value” principle.
This principle relies on a prospective valuation of future cash-flows from the current book of contracts with a margin for risk and uncertainty and a discount of technical reserves.

This paper is providing some technical proposals, based on Generalized Linear Models.

Keywords: General insurance, IAS standards, discounted future cash-flows, Market Value Margin, stochastic reserving, GLM, bootstrap.