Performance Management in Insurance Firms by Using Transfer Pricing

René Doff, J. Bilderbeek, Bert Bruggink, Pieter Emmen

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    Abstract

    In this article, we analyze the asset and liability management and market risk systems of insurance companies. We discuss that the current system is not goal congruent and does not satisfy necessary conditions for effective control. It follows that managers are unable to run their business effectively. We develop a transfer pricing system that allows the clear separation of underwriting and investment activities, both on the risk and return aspects. It creates the appropriate incentive schemes. We illustrate this system with an example indicating the differences in incentives between the traditional embedded value measures and the proposed funds transfer pricing system.
    Original languageUndefined
    Pages (from-to)213-226
    JournalRisk Management and Insurance Review
    Volume12
    Issue number2
    DOIs
    Publication statusPublished - 2009

    Keywords

    • IR-72708

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