How Fair Value Measurement Changes Risk Management Behavior in the Insurance Industry


#1

Reading Source: http://www.soa.org/Files/Research/Projects/research-how-fair-value-report.pdf

Topics Covered in this Reading:

  • Executive Summary
    • Market-Consistent Accounting
    • Is Market Consistent Accounting Appropriate for Insurance Liabilities?
    • Why Do Insurance Companies Hedge?
    • Company Actions Driven by Market Consistent Frameworks
  • Reliances and Limitations
  • Introduction
  • Use of Fair Value in the United States Today
    • Accounting Fair Value Under US GAAP and IFRS
    • Market Consistent Embedded Value
    • The Upcoming Insurance Contracts Accounting Standards
    • Solvency 2
    • Variable Annuity Guarantees Under US GAAP That Are Not Fair Valued
    • Statutory Reserves and Required Capital in the United States for Variable Annuity Guarantees
  • How Accounting Can Encourage or Discourage Risk Management Practices
    • An Illustration
    • Risk Management Priorities
  • Risk Management Techniques
    • Accepting Financial Risk in Liabilities
    • Immunizing Financial Risk in Liabilities
  • Product Mix and Product Development
    • Overview
    • Market Consistent Value of New Business
    • Trends in Variable Annuity Product Design
  • Hedging
    • Common Hedging Practices
    • Variable Annuity Hedging Effectiveness
    • Other Challenges in Variable Annuity Hedging
    • Challenges in Hedging Other Products
  • Reinsurance
    • An Illustration
    • Potential Drivers for Change
  • Other Risk Management Techniques
    • A Management Compensation
    • Accounting Presentation
    • Liquidity Premium
  • Upcoming Changes to Accounting and Solvency Standards
    • Pricing
    • ALM and Hedging
    • Reinsurance
    • Features of the Insurance Contracts Accounting That Impact Risk Mitigation Practices
    • Is Market-Consistent Accounting Appropriate For Insurance Liabilities?
  • Appendix A: Theoretical Foundations of Risk Management
    • Costs Associated with Financial Distress
    • Corporations Have Preferential Access to Capital Markets
    • Agency Problem
  • Appendix B: Illustration of Put Option Value Relative to Volatility
  • Appendix C: Use of Discount Rates in Market Consistent Accounting