Filip Lindskog: Insurance valuation - A computable multi-period cost-of-capital approach

I will present an approach to market-consistent multi-period valuation of insurance liability cash flows based on a two-stage valuation procedure. First, a portfolio of traded financial instrument aimed at replicating the liability cash flow is fixed. Then the residual cash flow is managed by repeated one-period replication using only cash funds. The latter part takes capital requirements and costs into account, as well as limited liability and risk averseness of capital providers. The cost-of- capital margin is the value of the residual cash flow. I will present a general framework for the cost-of-capital margin, discuss relations to dynamic risk measurement and alternative valuation techniques.

The talk is based on joint work with Hampus Engsner and Mathias Lindholm