A Management Model of a General Insurance Company using Simulation Techniques

Abstract

The accounts of a general insurance company are not drawn up in such a way as to bring out the uncertainties involved in making an assessment of a company’s financial strength or of its future profit-earning capacity. Financial analysts attempt to infer the position from a careful examination of successive years’ accounts and the more detailed information available in returns to the supervisory authorities. A number of companies have developed a corporate planning process in which assumptions are made about future premium levels, volumes of business and profitability, and an attempt is made to follow this through to examine the impact on the balance sheet and future profits. However, in neither case is there an integrated model of the operations of the insurance company which takes uncertainty seriously into consideration.