Interest-Rate Changes and the Value of a Non-life Insurance Company

Author:

Albrecht Thomas,

Abstract

How does a change in the risk-free interest-rate affect the value of a non-life insurance company or portfolio? Risk managers typically argue that there should be little impact as long as assets and liabilities are properly matched. However, the risk-management perspective focuses on existing assets and liabilities, while neglecting the value of future business potential. This paper argues that interest-rate changes can have a significant impact on the appraisal value of a non-life insurance company, even if assets and liabilities are matched. This impact can be positive as well as negative, depending on the underlying parameters. Relevant parameters include reserving intensity, combined ratio, business growth-rate, asset allocation, risk-capital relative to premium income and the correlation between interest-rate and technical insurance results.

Publisher

Cambridge University Press (CUP)

Subject

Economics and Econometrics,Finance,Accounting

Cited by 2 articles. 订阅此论文施引文献 订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献

1. Response of Mexican life and non-life insurers to the low interest rate environment;The Geneva Papers on Risk and Insurance - Issues and Practice;2021-03-01

2. Internet use and insurance growth: evidence from a panel of OECD countries;Technology in Society;2020-08

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