Annamaria Olivieri and Ermanno Pitacco
Abstract
Safe-side requirements concern the assumptions used to calculate premiums in
relation to a set of more realistic assumptions. Roughly, safe-side
requirements express the capability of premiums to generate positive margins. In
a strictly actuarial framework, safe-side requirements are given in terms of
some notion of expected profit, calling for assumptions that let such profit be nonnegative. An
expected profit of zero, however, is not a realistic aim for the insurer.
We investigate the notion of conservative assumptions by adopting a unconventional approach. Our focus is the management of the financial resources coming both from premiums and from shareholders' capital. This leads to a general structure that includes as particular cases the results obtainable in a strictly actuarial environment.
Key words and phrases: technical basis, expected profit, portfolio fund, shareholders' capital, opportunity cost of capital, discounted cash flow.
Annamaria Olivieri
Dipartimento di Matematica Applicata ``Bruno de Finetti''
University of Trieste
Trieste
ITALY
Ermanno Pitacco
Dipartimento di Matematica Applicata ``Bruno de Finetti''
University of Trieste
Trieste
ITALY
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