Now showing 1 - 2 of 2
  • Publication
    The Influence of Corporate Taxes on Pricing and Capital Structure in Property-Liability Insurance
    (North Holland Publ. Co., 2008-03-01) ;
    A change in the corporate tax level can have a significant impact on rate making and capital structure for insurance companies. The purpose of this paper is to study this effect on competitive equity-premium combinations for different asset and liability models while retaining a fixed safety level. This is a crucial consideration as a change in the tax rate leads, in general, to a different risk of insolvency. Hence, fixing the safety level serves to isolate the effect of taxes without shifting the insurer's risk situation whenever taxes are varied. The model framework includes stochastic assets as well as stochastic claims costs. We further compare the results for liability models with and without a jump component. Insurance rate making is conducted using option pricing theory.
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    Scopus© Citations 15
  • Publication
    Assessing the Risk Potential of Premium Payment Options in Participating Life Insurance Contracts
    (Blackwell Publishing, 2008-09-01) ;
    Most life insurance contracts embed the right to stop premium payments during the term of the contract (paid-up option). Thereby, the contract is not terminated but continues with reduced benefits and often provides the right to resume premium payments later, thus reincreasing the previously reduced benefits (resumption option). In our analysis, we start with a basic contract with two standard options, namely, an interest-rate guarantee and cliquet-style annual surplus participation. Next, we include, in addition to the features of the basic contract, a paid-up and resumption option in the framework. We do not base our pricing on assumptions about particular exercise strategies, but instead assess the risk potential by providing an upper bound to the option price which is independent of the policyholder's exercise behavior. This approach provides important information to the insurer about the potential hazard of offering the paid-up and resumption option. Further, the approach allows an analysis of the impact of guaranteed interest rate, annual surplus participation, and investment volatility on the values of the premium payment options.
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    Scopus© Citations 21