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The Valuation of Insurance Liabilities: A Framework Based on First Principles

Author

Listed:
  • Andrea Bergesio

    (Department of Banking and Finance; Swiss Finance Institute)

  • Paul Huber

    (Swiss Re)

  • Pablo Koch-Medina

    (University of Zurich - Department of Banking and Finance; Swiss Finance Institute)

  • Lutz Wilhelmy

    (Swiss Re)

Abstract

We describe a framework for the valuation of insurance liabilities that relies on first principles in finance theory. Key features of the economic value of liabilities are its market-consistency and the inclusion of the costs of financial frictions. We compare this framework to the Solvency II approach and highlight the differences.

Suggested Citation

  • Andrea Bergesio & Paul Huber & Pablo Koch-Medina & Lutz Wilhelmy, 2020. "The Valuation of Insurance Liabilities: A Framework Based on First Principles," Swiss Finance Institute Research Paper Series 20-03, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2003
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    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3386182
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    More about this item

    Keywords

    Insurance; Valuation; Financial Frictions; Market Consistency; Solvency II;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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