investments – Twenty Third Floor

Actuarial and Risk, banking, financial risk, insurance, investments, life insurance, liquidity risk, measurement, systemic risk

Liquidity vs Solvency: Understanding Insurance Company Risks

2 November 2024

David Kirk

In this exploration of liquidity and solvency risks in insurance companies, we’ll examine how these risks interact, often in surprising ways. We’ll challenge common assumptions about insurance company risks and explore how modern insurance practices have evolved traditional risk profiles. Understanding the Basics: Banks vs Insurers The classic banking model of liquidity risk is straightforward:…
Read more: Liquidity vs Solvency: Understanding Insurance Company Risks
Actuarial and Risk, capital, insurance, investments, life insurance, market risk, measurement, Solvency Assessment and Management, Solvency II

The Equity Symmetric Adjustment: Dispelling Myths and Understanding Market Dynamics

25 September 2024

David Kirk

Introduction In the world of insurance regulation, few mechanisms are as misunderstood as the equity symmetric adjustment (ESA), also known as the equity dampener. This feature, present in both the Solvency II framework in Europe and the Solvency Assessment and Management (SAM) regime in South Africa, is often incorrectly associated with the concept of mean…
Read more: The Equity Symmetric Adjustment: Dispelling Myths and Understanding Market Dynamics
Actuarial and Risk, alternative investments, capital, climate change, Emerging Markets, emerging risk, hedging, insurance, investments, microinsurance, Solvency Assessment and Management, Solvency II

Parametric insurance getting ready for prime time

26 August 2024

David Kirk

Parametric insurance has been growing as a tool to manage risk transfer. This may become even more important as risks become more difficult to insure, and the basis risk becomes more palatable. Parametric insurance is showing signs of being ready for prime-time. Greater demand due to climate change, and greater supply as more entities and…
Read more: Parametric insurance getting ready for prime time
alternative investments, financial risk, insight, investments

Two Pot ambitions

13 March 2024

David Kirk

The goals of two-pot are admirable. The implementation somehow both rushed and drawn out. The promises – of decreased unnecessary financial hardships, fewer self-defeating decisions, and improved long term savings rates are dazzling. The nagging fear though, is that whatever institutions and professionals and government departments may learn from Chile and Peru, individuals will inevitably…
Read more: Two Pot ambitions
Actuarial and Risk, competition, complexity, creating value, currency risk, distribution, Emerging Markets, inflation, insurance, investments, life insurance

Familiarity breeds Complexity

7 March 2024

David Kirk

I’ve had reasons to think about Nigeria recently, in general but also from an insurance market and acquisition environment. I’ve helped several investors looking at Nigerian insurers over the years. Familiarity with the market and the expectations of these investors has bred complexity rather than contempt. This isn’t an easy diagnosis of land of plenty…
Read more: Familiarity breeds Complexity
Actuarial and Risk, alternative investments, capital, credit risk, financial risk, hedging, insurance, investments, life insurance, liquidity risk, market risk, Solvency Assessment and Management, Solvency II, valuation

Capital implications of infrastructure assets for insurers under SAM

10 September 2019

David Kirk

Infrastructure as an asset class is hardly a new idea. Retirement funds are attracted to the promise of higher turns, long-dated cash flows, and consistency with increasingly important ESG factors. Insurers, unlikely retirement funds, have to hold risk-based capital against the risks inherent in their investments. This makes it more difficult to underestimate the risks…
Read more: Capital implications of infrastructure assets for insurers under SAM
economics, financial reporting, financial risk, insight, investments, managing uncertainty, market risk

Ghosts of bullets dodged

18 May 2019

David Kirk

I have never owned Steinhoff shares. I was surprised then, when going through some old blog uploads (dealing with a separate copyright issue that I may touch on in another post) to find this share price graph of Steinhoff from 2007 I don’t remember looking at this, but the blog entry was actually about insider…
Read more: Ghosts of bullets dodged
alternative investments, creating value, economics, Equity Risk Premium, investments, market risk, measurement, private equity

ERP update – delayed response to a blog reader

19 October 2017

David Kirk

I reader asked why so many practitioners use high Equity Risk Premiums in their valuations and fairness opinions. In particular, he mentioned a specific assumption set he had seen including: ERP of 6.8% company specific risk premium of 4% He also commented on how haphazard the use of risk premiums can be and referenced a…
Read more: ERP update – delayed response to a blog reader

Twenty Third Floor

Figuring out the future and the now

Category: investments

Liquidity vs Solvency: Understanding Insurance Company Risks

The Equity Symmetric Adjustment: Dispelling Myths and Understanding Market Dynamics

Parametric insurance getting ready for prime time

Two Pot ambitions

Familiarity breeds Complexity

Capital implications of infrastructure assets for insurers under SAM

Ghosts of bullets dodged

ERP update – delayed response to a blog reader

About David Kirk

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