Pricing Insurance Risk: Theory and Practice
A comprehensive framework for measuring, valuing, and managing risk.
Stephen J. Mildenhall and John A. Major
Pricing Insurance Risk: Theory and Practice delivers an accessible and authoritative account of
to determine the premium for a portfolio of non-hedgeable insurance risks and how to allocate it
to each portfolio component.
The authors synthesize hundreds of academic research papers, bringing to light little-appreciated
answers to fundamental questions about the relationships between insurance risk, capital, and
premium. They lean on their industry experience throughout to connect the theory to real-world
practice, such as assessing the performance of business units, evaluating risk transfer options,
and optimizing portfolio mix.
Readers will discover:
- Definitions, classifications, and specifications of risk
- An in-depth treatment of classical risk measures and premium calculation principles
- Properties of risk measures and their visualization
- A logical framework for spectral and coherent risk measures
- How risk measures for capital and pricing are distinct but interact
- Why the cost of capital, not capital itself, should be allocated
- The natural allocation method and how it unifies marginal and risk-adjusted probability
- Applications to reserve risk, reinsurance, asset risk, franchise value, and portfolio
- Perfect for actuaries working in the non-life or general insurance and reinsurance sectors,
Pricing Insurance Risk: Theory and Practice is also an indispensable resource for banking
and finance professionals, as well as risk management professionals seeking insight into
measuring the value of their efforts to mitigate, transfer, or bear nonsystematic