Risk and Capital Management in Insurance Companies

Abstract

This article is reasoning why risk and capital management in insurance companies malfunctioned partially during the recent capital market crises and what measures insurers and regulators have to adopt to ameliorate thoroughly their control and steering systems. Comparisons to finance and banking are made throughout the article, because they are Instructive and rich in contrast.

Formation of the optimal portfolio of insurer’s services of the voluntary types of insurance

“…The search of the optimal portfolio of insurance services is done by using the functions of MS Excel 2010 "Search of Solutions" from the packet "Analysis" (Markovitz, 1952). In doing so, restrictions were imposed in accordance with model (2). The values of the specific weight of a particular type of insurance were limited to 15%, which, in our opinion, will make it possible to include the maximum number of selected insurance services.…”

“…Each of them noted key aspects of quality management of insurance companies. For example, Bomhard (2005) notes that particularly relevant in conditions of financial instability is to harmonize the requirements of state regulations of the insurance industry, to use separate management of risks of certain types of insurance, paying special attention to the placement of insurance reserves. Krenn & Oschischnig (2003) identify a number of key factors that must be taken into account by insurance companies in the management of insurance portfolios.…”

Dynamic Financial Analysis: Classification, Conception, and Implementation

“…Third, changing supervisory and legal frameworks in the past years have resulted in the reregulation of the financial services market and made necessary the establishment of an integrated risk management system within insurance companies. There has been a recent, fundamental reorganization of the solvency rules in the European Union, which is discussed in Solvency II (see, e.g., von Bomhard, 2005; Eling et al, 2007). Under the new solvency rules, regulators encourage insurance companies to determine their risk‐based capital by internal risk management models.…”