This paper develops the Daykin et al (1994) asset/liability model to examine specifically the effects of different reinsurance programmes on the capital of a direct insurance company. By modelling the gross premiums and claims separately from the impact of reinsurance on them, it is possible to examine directly the effects of different reinsurance programmes on a company's expected performance just as easily as changes in asset mix or business volumes. The paper goes on to discuss the necessary assumptions to be built into such a model, and then gives a worked example. The emphasis of the paper is on management reporting rather than on mathematical detail.
