Research & Insights
Market-Consistent Valuation: Judging the market
Craig Turnbull
Recent market turmoil has further highlighted the challenge the insurance industry faces when valuing their liabilities. Like the CRO Forum1, 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.
