Extended Solvency Margin as a Measure of the Insolvency Risk of Life Insurance Companies
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The article describes models used to determine the insolvency risk of life insurance companies. This paper gives a presentation of the solvency margin, and the concept of the extended solvency margin. It further describes the concept of a scale of safety, which allows the risk of an insurance company to be expressed in terms of capital requirement. A method is presented for assessing the extended solvency margin (ESM). The risk of insolvency is analyzed in an annual time perspective. The theoretical discussion is illustrated with empirical examples derived from life insurance companies operating as joint stock companies in Poland in the period 1995-2003.
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