Insurance Portfolio Management: Adopting a Value at Risk Approach

From a theoretical perspective, the Value-at-Risk (VAR) measure should hold great promise and applicability for insurers and reinsurers. Yet despite its prevalent use throughout the banking and investment marketplace, VAR has seen little use in insurance. This paper examines the nature of insurance portfolio management and the underlying design of VAR. By broadening the VAR concept to a full three dimensions (a VAR-Plane) and providing several derivative tools for this plane, it is shown that the basic construction of VAR is ideal for insurance and reinsurance portfolio management.

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