Description: Reinsurance reduces the required capital of the primary insurer but increases that of the reinsurer. Capital is costly. All capital costs, including that of the insurer and the reinsurer, are ultimately borne by primary policyholders. Reducing the total capital of insurers and reinsurers brings down the total capital cost and the total primary policy premium. A reinsurance arrangement is considered optimal—if it minimizes the total required capital. This optimal reinsurance is an attracting equilibrium under price competition. Evidence suggests an inverse relationship between the total required capital and the correlation between the losses held by different insurers and reinsurers. Examples are constructed to examine this and other properties of the optimal reinsurance.

Description: Performance measurement is not the primary purpose of either GAAP or statutory accounting. This article discusses alternative methods of reporting used by life insurance companies to better measure financial performance.

Description: The Society's Task Force to Study Risk of Loss from Changes in the Interest Rate Environment C-3 Risk Task Force was formed in March 1981 with the charge to quantify C-3 risk. The Task Force made a preliminary report as part of a panel discussion on C-3 risk at the Society's October 1981 meeting in Atlanta. This presentation provides an update on the progress to date and its future plans.

Description: The five words for ERM are transparency, discipline, alignment, adaptability and resilience. This article focuses on transparency, discipline and resilience.