Market-Consistent Valuation: Judging the Market
Document ID: 2009-1487
Published on: 29th May 2009
Author: Craig Turnbull
Recent market turmoil has further highlighted the challenge the insurance industry faces when valuing their liabilities. Like the CRO Forum , we believe the principal of market-consistent valuation is the right basis for this job. Whilst financial economics and mathematical models provide the intellectual technology for market-consistent valuation, its application to insurance liabilities can require significant judgement which must be applied within a good governance structure.
In this note we consider how the need for judgement in the market-consistent valuation process arises and what it means for risk managers.
