Asset Allocation to Optimise Life Insurance Annuity Firm Economic Capital and Risk Adjusted Performance

Porteous, Bruce and Tapadar, Pradip (2008) Asset Allocation to Optimise Life Insurance Annuity Firm Economic Capital and Risk Adjusted Performance. Annals of Actuarial Science, 3 (1/2). pp. 187-214. ISSN 1748-4995. (Full text available)

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http://dx.doi.org/10.1017/S1748499500000506

Abstract

The impact that asset allocation has on the economic capital and the risk adjusted performance of financial services firms is considered in this article. A stochastic modelling approach is used in conjunction with a life insurance annuity firm illustrative example. It is shown that traditional solvency driven deterministic approaches to financial services firm asset allocation can yield sub optimal results in terms of minimising economic capital or maximising risk adjusted performance. Our results challenge the conventional wisdom that the assets backing life insurance annuities and financial services firm capital should be invested in low risk, bond type, assets. Implications for firms, customers, capital providers and regulators are discussed.

Item Type: Article
Subjects: Q Science > QA Mathematics (inc Computing science)
Divisions: Faculties > Sciences > School of Mathematics Statistics and Actuarial Science > Actuarial Science
Depositing User: Pradip Tapadar
Date Deposited: 20 Jan 2010 12:02 UTC
Last Modified: 14 Nov 2016 13:26 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/22840 (The current URI for this page, for reference purposes)
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