on Economic Capital Allocation for Property Insurance: from Aspect of Underwriting Risks in Financial Engineering

摘要

Economic capital model embodies many components, of which the measurement is a synthesis of techniques from actuarial science and financial engineering. For insurance company it is an estimate of the level of capital that a firm requires to operate its business. So this article implemented TailVaR model to empirically analyze economic capital of Chinese top six insurance companies in terms of claim ratio on two aspects. One is the measurement of total economic capital. The other is the allocation of economic capital into different lines of business. So the following conclusions can be drawn from this empirical analysis: Firstly, different lines of business should be engineered by different risk management strategies, especially the liability line needs to be improved Secondly, the effect of "Risk Pool" can reduce the economic capital requirement for unexpected loss. Finally, this article proposed several suggestions on economic capital management for Chinese insurance companies.