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Catastrophe Reinsurance Pricing -Modification of Dynamic Asset-Liability Management

Author

Listed:
  • Han-Bin KANG

    (Qingdao University, School of Economics, Qingdao, Shandong, China)

  • Hsuling CHANG

    (Ling Tung University, Department of Accounting, Taichung, Taiwan)

  • Tsangyao CHANG

    (Feng Chia University, Department of Finance, Taichung, Taiwan)

Abstract

This study emphasizes the catastrophic reinsurance pricing and its sensitivity based on the asset-liability management (ALM) model. For this purpose, the instantaneous interest rate elastic stochastic ALM model of asset liability valuation is modified. Further, taking the earthquake disaster loss in China as an example, the rates of the catastrophe reinsurance are simulated by Monte Carlo method and the sensitivities of asset liability ratio, trigger level, debt structure and basis risk of the catastrophe reinsurance pricing are studied. This paper provides a validation study on the modification of the ALM model, and a quantitative reference regarding the rates of catastrophe reinsurance for the reinsurance company to deal with huge catastrophe losses such as earthquake or hurricane.

Suggested Citation

  • Han-Bin KANG & Hsuling CHANG & Tsangyao CHANG, 2022. "Catastrophe Reinsurance Pricing -Modification of Dynamic Asset-Liability Management," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 5-20, December.
    • Handle: RePEc:rjr:romjef:v::y:2022:i:4:p:5-20
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    References listed on IDEAS

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    Cited by:

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    2. Graţiela Georgiana NOJA & Gheorghe HURDUZEU & Mirela CRISTEA & Flavia BARNA & Miruna-Lucia NĂCHESCU & Camelia GAVRILESCU, 2023. "Board Characteristics, Ownership Concentration and the Financial Performance of European Listed Insurance Companies: New Empirical Evidence," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 25-42, December.

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    More about this item

    Keywords

    catastrophe reinsurance; catastrophe bonds; asset-liability management; Monte-Carlo simulation;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics

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