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An Integrated Dynamic Financial Analysis and Decision Support System for a Property Catastrophe Reinsurer1

Published online by Cambridge University Press:  29 August 2014

Stephen P. Lowe  and
James N. Stanard
Stephen P. Lowe*
Affiliation:
Tillinghast – Towers Perrin
James N. Stanard*
Affiliation:
Renaissance Re Holdings, Ltd.
*
Chief Actuary, Tillinghast – Towers Perrin, 175 Powder Forest Drive, Wealogue, Connecticut 06089-9658, USAlowes@towers.com
Chairman, President and Chief Executive Officer, Renaissunce Re Holdings, Ltd., Renaissance House, East Broadway, P. O. Box HM 2527, Hamilton HMGX, Bermudajns@renre.bm
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Abstract

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This paper describes the dynamic financial analysis model currently being used by a property catastrophe reinsurer to manage its business. The model is-an integral part of the day-to-day operations at the Company, and is used as a decision making tool in the underwriting, investment, and capital management processes. The paper begins by describing the framework that the Company uses for risk management. This includes a classification of the risks facing the Company, which is used to define and prioritize their implementation in the model. Also included is a description of the conceptual approach the Company takes to evaluate the tradeoff between risk and return. The paper then goes on to describe the structure and operation of the dynamic financial analysis model and provides examples of its use at the Company, along with illustrative examples of the various types of output it produces.

Keywords

Asset/Liability managementCapital adequacyDynamic financial analysisExpected policyholder deficitModern portfolio theoryProperty catastrophe reinsuranceRisk managementSimulation modelsUnderwriting cycles
Type
Workshop
Information
ASTIN Bulletin: The Journal of the IAA , Volume 27 , Issue 2 , November 1997 , pp. 339 - 371
Copyright
Copyright © International Actuarial Association 1997

Footnotes

1

An earlier version of this paper was prepared for the Casualty Actuarial Society's 1996 Call for Papers on Dynamic Financial Models of Property/Casualty Insurers. An updated version was presented at the XXVII ASTIN Colloquium in Copenhagen.

References

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