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Title: Dynamic financial analysis in the insurance industry : a study of current practices, determinants of company performance, and application of dynamic financial analysis
Author: Shiu, Yung-Ming
Awarding Body: University of Edinburgh
Current Institution: University of Edinburgh
Date of Award: 2004
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Dynamic Financial Analysis (DFA) has become one of the important tools that actuaries use to model the underwriting and investment operations of insurance companies. This thesis investigates two major related issues concerning the application of DFA, including the current practices of DFA/Dynamic Solvency Testing (DST)/Financial Condition Reports (FCR), and the performance determinants that should be considered being included in DFA/DST applications. The empirical research presented in this thesis is based on the non-life and life postal surveys that were administered in May 2002, interviews conducted with some of the survey respondents, and statutory returns filed by UK insurers to the supervisory authority. The principal conclusions of this thesis are: (1) the proportion of life offices using financial modelling techniques and FCR is greater than that of their non-life counterparts, and with-profits offices tend to use more techniques and are more capable of doing sophisticated asset modelling than their non-profit counterparts, (2) lack of need is the main reason why these techniques and FCR are not commonly used in the non-life sector, and (3) liquidity, unexpected inflation, and interest rate level are determinants of general insurer performance, whereas company size is a determinant of life office performance. Moreover, a number of differences between the non-life and life offices are identified. First, non-life insurers conduct scenario testing on a more frequent basis than life offices. Second, most of the risk categories tested in non-life scenarios are related to underwriting operation, whereas those in life scenarios are related to investment operation.  Third, life offices generally use a longer projection period in DST/business plan than their non-life counterparts in DFA/business plan. Finally, the projection periods in DFA and business plan are significantly correlated in non-life insurance, whereas this correlation between DST and business plan is not found in life insurance.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available