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Contribution Details
| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | Capital allocation in insurance |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Number of Pages | 69 |
| Date | 2017 |
| Abstract Text | The allocation of capital and the correspondent costs has become a major focus for business steering and performance measurement in insurance companies. This master's thesis provides insights according to an extended marginal capital allocation method {using a contingent claims approach{ into how profitability rankings of different business lines can be established in a one-period complete market setting. On the basis of that, it is shown in which line the insurer should grow and which to reduce. An application of a simulated portfolio mix evaluation {in imperfect markets{ with performance metrics such as RAROC and EVA when lines of businesses are correlated with the market is performed. According to my analysis, this allows management in insurance to set the scope under what conditions prfitability rankings for subportfolios are relevant. Eventually, implications are brought forward of the conducted performance measurement analysis by demonstrating that by means of an \integrated income statement" approach, EVA is not able to differentiate between earnings from underwriting activities and earnings from investment operations and to establish an exact time reference for those earnings. This implies that EVA may lead to biased profitability rankings. |
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