Allowing for illiquidity and other market stress impacts in the valuation of insurance liabilities

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By Scott Mitchell, Dominic Clark | 10 January 2012

There has been much recent debate about the impact of the current financial crisis on the valuation of insurance liabilities, particularly in the context of Solvency II and the Swiss Solvency Test. This paper discusses one of the fundamental problems when valuing insurance liabilities on a market value basis, as well as important questions and implications for the insurance industry.