October 2014
Intermediate to advanced
584 pages
22h 2m
English
Content preview from Pricing in General Insurance
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294 Pricing in General Insurance
19.2.4.1 Method 1: Proportional Spread
The capital allocated to the different lines of business is proportional to the risk posed by
that line of business, scaled so that the overall capital is equal to £918.99M.
For example, the capital allocated to the line of business 1 is
CapitalVaR( ;)
.
...
.1
221 24
221 24 506 7 403 52
918=
++
× 999 179 69= £.M
in the case that VaR is used as a risk measure, and
Capital;TVaR)(
.
...
1
496 27
496 27 1628 57 1335 81
=
++
× 9918 99 131 79.£.= M
in the case that TVaR is used as a risk measure.
Replicating these calculations for all three lines of business yields the results in
Figure ...
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