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On market value margins and cost of capital

  • Original Research Paper
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Blätter der DGVFM

Abstract

The valuation of insurance liabilities plays a central role in the design of any solvency framework. We investigate the notion of “fair value of liabilities” at a conceptional level and compare several implementations which are currently discussed in the Solvency II project. Our focus is on the cost of capital approach based on market information. In particular, we discuss the applicability of arguments borrowed from financial mathematics.

Zusammenfassung

Die Bewertung versicherungstechnischer Verbindlichkeiten spielt eine zentrale Rolle bei der konzeptionellen Ausgestaltung eines Rahmens für Solvabilitätsvorschriften. Wir untersuchen den Begriff des „Fair Value“ von versicherungstechnischen Verbindlichkeiten und vergleichen verschiedene Ausgestaltungen, die zur Zeit im Projekt „Solvency II“ diskutiert werden. Wir konzentrieren uns dabei auf den Kapitalkostenansatz (cost of capital), der Marktinformationen ausnutzt. Insbesondere diskutieren wir die Frage, inwieweit Argumente aus dem Bereich der Finanzmathematik angewandt werden können.

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Authors and Affiliations

  1. New York, USA

    Marcus Kriele

  2. Remagen, Germany

    Jochen Wolf

Authors
  1. Marcus Kriele
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  2. Jochen Wolf
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Correspondence to Marcus Kriele.

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Kriele, M., Wolf, J. On market value margins and cost of capital . Blätter DGVFM 28, 195–219 (2007). https://doi.org/10.1007/s11857-007-0018-y

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  • DOI: https://doi.org/10.1007/s11857-007-0018-y

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