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Bijak Wojciech (Szkoła Główna Handlowa w Warszawie), Smętek Mariusz, Szymański Grzegorz
Valuation of Insurance Liabilities - Cost of Capital Method
Roczniki Kolegium Analiz Ekonomicznych / Szkoła Główna Handlowa, 2007, nr 17, s. 225-246, rys., tab., bibliogr. 27 poz.
Issue title
Discovering patterns in economic data
Międzynarodowe Standardy Rachunkowości (MSR), Towarzystwa ubezpieczeniowe, Ryzyko w ubezpieczeniach, Instrumenty finansowe, Dyrektywa Solvency II
International Accounting Standards (IAS), Insurance company, Insurance risk, Financial instruments, Solvency II directive
Valuation of liabilities (technical provisions) arising from insurance contracts constitutes the key issue for the safety of insurance undertakings. Works on International Accounting Standards and on Solvency II project are aimed at establishing rules of market consistent valuation of insurance liabilities. Such standards have been worked out for the valuation of assets. The question of the definition of market consistent valuation of technical provisions remains unanswered. At present there are two potential standards under consideration: the percentile approach already used in a number of countries and the cost of capital approach used only in Switzerland among European countries and promoted by large insurance undertakings and the CEA (Comité Européen des Assurances), an organisation for European insurance associations and unions. The article presents basic rules for liabilities valuation, methods of market consistent valuation of insurance liabilities with particular consideration of the cost of capital method, and methods of calculating the cost of capital rate. Example results of liabilities valuation - according to both the percentile approach and the cost of capital approach concern the provisions for claims outstanding for non-life insurance undertakings operating in Poland. (original abstract)
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