Embedded value

Abstract: In the framework of Embedded Value new standards, namely the MCEV norms, the latest principles published in June 2008 address the issue of market and underwriting risks measurement by using stochastic models of projection and valorization. Knowing that stochastic models particularly data-consuming, the question which can arise is the treatment of insurance portfolios only available in aggregate data or portfolios in situation of incomplete information. The aim of this article is to propose a pragmatic modeling of these risks tied up with death covers of individual protection products in these situations.

Abstract: In recent years, much debate about the value of e-Business and information technology (IT) has been raised. Although the macro-level effect of IT and e-Business is undisputed, a question remains on whether eBusiness can provide differential benefits to individual firms. In this sense, there is a need to further investigate whether and how e-Business creates value. To respond to this challenge, this paper develops a conceptual model, grounded in the resource-based theory, which analyzes the complementarity of Internet resources and e-Business capabilities as source of business value. This model posits three relationships: Internet resources and business value, internal e-Business capabilities and business value, and the complementarity of Internet resources and internal e-Business capabilities. To test hypotheses, a sample comprising 1,010 Spanish firms is employed. The results show that, as hypothesized, Internet resources per se are not positively related to business value and that internal e-Business capabilities have a positive significant impact on business value. In addition, the results offer support for the complementarity of Internet resources and internal e-Business capabilities as source of business value.

Abstract: The asset value of government has traditionally been seen as the accounting value of public assets. But an alternative more market oriented concept can be backed out of credit default swap pricing, as implied sovereign asset value. Unlike the private sector, it is not a necessary public sector objective to maximise functional asset value as such. Asset volatility impacts on the division of asset value as between debt holders and taxpayers as the implied equity holders. Governments exposed more to economic shocks need to make more provision for buffering implied equity exposure. The ability to do so endows a real option value to budget flexibility. Relating the backed out asset value or cover to selected economic drivers can be a instructive exercise for market participants as well as for governments.

Abstract: We consider a monopoly insurance company that is unable to estimate the value of covered assets at the time of underwriting. Only the distribution of the severity of losses is known. Also, an ex-post appraisal of the value of the property can be performed in case of accident. As in most property insurance lines, the premium paid relies on the value of the asset announced by the owner. The coinsurance clause stipulates that the indemnity paid by the insurer equals the actual loss multiplied by the ratio of the amount of insurance carried over the value of the insured property. We show that this clause does not allow the insurer to extract a maximum surplus from trade in the sense that policyholders would deliberately underestimate the value of their asset under that clause. We derive the monopoly equilibrium when this clause is imposed by the State using an argument of fairness among policyholders. We show that owners with a low property value will be partially insured at equilibrium, whereas owners with a larger value will be fully covered.