Finance Department

 

Date of this Version

2000

Document Type

Article

Citation

Journal of Actuarial Practice 8 (2000), pp. 115-146

Comments

Copyright 2000 Absalom Press

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 non-negative. 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.

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