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Modelling the operations of a general insurance company by simulation

Published online by Cambridge University Press:  20 April 2012

C. D. Daykin  and
G. B. Hey
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Extract

1.1 The traditional approach to examining the financial status of a company is to look at the balance sheet and the profit and loss account. Such information is usually publicly available, it is certified by the auditors as having been drawn up according to relevant accounting standards and it is generally presumed to communicate reliable information.

1.2 In the case of a manufacturing or trading company the profit and loss account records purchases and sales and the balance sheet will include a valuation of stock in hand, since it is anticipated that this will give rise to future sales income. Working capital is required because products have to be manufactured or purchased before they can be sold. Profit is realized when the product is sold for more than it cost to buy it or to make it.

Type
Research Article
Information
Journal of the Institute of Actuaries , Volume 116 , Issue 3 , December 1989 , pp. 639 - 662
Copyright
Copyright © Institute and Faculty of Actuaries 1989

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References

(1) Daykin, C. D., Bernstein, G. D., Coutts, S. M., et al. (1987). Assessing the Solvency and Financial Strength of a General Insurance Company. J.I.A. 114, 227–310.Google Scholar
(2) Daykin, C. D. & Hey, G. B. (1989). A Practical Risk Theory Model for the Management of Uncertainty in a General Insurance Company. (Paper presented to the ASTIN Colloquium in New York, November 1989.)Google Scholar
(3) Wilkie, A. D. (1986). A Stochastic Investment Model for Actuarial Use. T.F.A. 39, 341–373.Google Scholar
(4) Daykin, C. D. & Hey, G. B. (1990). Managing Uncertainty in a General Insurance Company. (Paper presented to the Institute of Actuaries, January 1990.)CrossRefGoogle Scholar