Ebook: The Fair Value of Insurance Liabilities

This book explores theoretical and practical implications of reflecting the fair value of liabilities for insurance companies. In addition, the contributions discuss the disclosure of these values to the financial and regulatory communities and auditing firms which are actually calculating this illusive but important variable. It combines contributions by distinguished practitioners from the insurance, accounting and finance fields, with those of prominent academics. One of the central themes of the collection is that adequate disclosure of the true economic value of insurance company liabilities is both possible and desirable. Wherever possible, the insurance valuation process is wedded with modern financial theory. For example, the use of option pricing theory is applied to insurance companies, where the true value of the firm's liabilities is a critical variable. Methods such as cash flow, earned profit and indirect discount are explored.

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This book explores theoretical and practical implications of reflecting the fair value of liabilities for insurance companies. In addition, the contributions discuss the disclosure of these values to the financial and regulatory communities and auditing firms which are actually calculating this illusive but important variable. It combines contributions by distinguished practitioners from the insurance, accounting and finance fields, with those of prominent academics. One of the central themes of the collection is that adequate disclosure of the true economic value of insurance company liabilities is both possible and desirable. Wherever possible, the insurance valuation process is wedded with modern financial theory. For example, the use of option pricing theory is applied to insurance companies, where the true value of the firm's liabilities is a critical variable. Methods such as cash flow, earned profit and indirect discount are explored.

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This book explores theoretical and practical implications of reflecting the fair value of liabilities for insurance companies. In addition, the contributions discuss the disclosure of these values to the financial and regulatory communities and auditing firms which are actually calculating this illusive but important variable. It combines contributions by distinguished practitioners from the insurance, accounting and finance fields, with those of prominent academics. One of the central themes of the collection is that adequate disclosure of the true economic value of insurance company liabilities is both possible and desirable. Wherever possible, the insurance valuation process is wedded with modern financial theory. For example, the use of option pricing theory is applied to insurance companies, where the true value of the firm's liabilities is a critical variable. Methods such as cash flow, earned profit and indirect discount are explored.
Content:
Front Matter....Pages i-xviii
Background on fair value accounting of insurance company assets and liabilities....Pages 1-6
Comparison of methods for fair-value life insurance liabilities....Pages 7-20
Fair valuation of life insurance company liabilities....Pages 21-126
Experience in implementing fair value of insurance liabilities....Pages 127-142
Allowing for asset, liability and business risk in the valuation of a life company....Pages 143-200
A market-value accounting framework for insurance companies....Pages 201-213
The value of the firm: the option adjusted value of distributable earnings....Pages 215-295
The cash flow method for valuing liabilities in Canada....Pages 297-301
The derivation and application of accounting standards to the market value of liabilities....Pages 303-330
The indexed discount rate method for fair valuation of liabilities....Pages 331-349
Is Paul v. Virginia dead?....Pages 351-360
Comments on ‘Earned profit method’, ‘Indexed discount rate method’ and ‘Is Paul vs. Virginia dead?’....Pages 361-362
Back Matter....Pages 363-381

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This book explores theoretical and practical implications of reflecting the fair value of liabilities for insurance companies. In addition, the contributions discuss the disclosure of these values to the financial and regulatory communities and auditing firms which are actually calculating this illusive but important variable. It combines contributions by distinguished practitioners from the insurance, accounting and finance fields, with those of prominent academics. One of the central themes of the collection is that adequate disclosure of the true economic value of insurance company liabilities is both possible and desirable. Wherever possible, the insurance valuation process is wedded with modern financial theory. For example, the use of option pricing theory is applied to insurance companies, where the true value of the firm's liabilities is a critical variable. Methods such as cash flow, earned profit and indirect discount are explored.
Content:
Front Matter....Pages i-xviii
Background on fair value accounting of insurance company assets and liabilities....Pages 1-6
Comparison of methods for fair-value life insurance liabilities....Pages 7-20
Fair valuation of life insurance company liabilities....Pages 21-126
Experience in implementing fair value of insurance liabilities....Pages 127-142
Allowing for asset, liability and business risk in the valuation of a life company....Pages 143-200
A market-value accounting framework for insurance companies....Pages 201-213
The value of the firm: the option adjusted value of distributable earnings....Pages 215-295
The cash flow method for valuing liabilities in Canada....Pages 297-301
The derivation and application of accounting standards to the market value of liabilities....Pages 303-330
The indexed discount rate method for fair valuation of liabilities....Pages 331-349
Is Paul v. Virginia dead?....Pages 351-360
Comments on ‘Earned profit method’, ‘Indexed discount rate method’ and ‘Is Paul vs. Virginia dead?’....Pages 361-362
Back Matter....Pages 363-381
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