This paper compares the shareholder-value-maximizing capital structure and pricing policy of insurance groups against that of stand-alone insurers. Groups can utilise intra-group risk diversification by means of capital and risk transfer instruments. We show that using these instruments enables...

This paper analyzes how capital-related frictional costs (e.g., corporate or personal taxes) influence insurers' optimal pricing and safety level decisions. Frictional costs are modeled with an innovative generic approach that is compatible with many realistic forms of taxation. I show that in...

Modern regulatory capital standards, such as the Solvency II standard formula, employ a correlation based approach for risk aggregation. The so-called "square-root formula" uses correlation parameters between, for example, market risk, non-life insurance risk and default risk to determine the...

Tail-correlation matrices are an important tool for aggregating risk measurements across risk categories, asset classes and/or business segments. This paper demonstrates that traditional tail-correlation matriceshich are conventionally assumed to have ones on the diagonalan lead to substantial...

Gradient capital allocation, also known as Euler allocation, is a technique used to redistribute diversified capital requirements among different segments of a portfolio. The method is commonly employed to identify dominant risks, assessing the risk-adjusted profitability of segments, and...

This article investigates the question of how risk management should be embedded in a financial firm's hierarchy. We answer this question by combining capital market theory with game-theoretic thinking. We develop a theory for the integration of risk management into an organization, based on...