The Application Of MR Capital Allocation Model In Non-life Insurance Company Pricing

With the joining of WTO agreement, the internationalized process of the insurance of our country must be accelerated. China Insurance Regulatory Commission is relaxing the regulations about fund application respect of the insurance progressively, the fund of the insurance will be used in the investment of various kinds of forms more and more. At the same time our country has already unlocked the insurance premium rate of motor vehicle, the price decontrolling the insurance goods in an all-round way nationwide will come true sooner or later. So, the supply-demand relationship between financial market and insurance market will become the important factor of insurance pricing. However, the traditional pricing method has not considered these factors, so it is necessary to research the new pricing method of insurance company under the new conditions .Chapter one of this text has recommended the foreign insurance to apply financial economy to the products pricing method of insurance company, but these methods have not explained how to determine the fair premium of the multiple-line insurance company .In order to solve many business line insurance company pricing problem, chapter two introduce an very important model in insurance company capital allocation field - MR capital allocation model, through deriving capital allocation formula and simulation analysis indicate MR model allocate multiple- line insurance company capital scientifically. In order to apply MR model to non-life insurance pricing, chapter three will extend MR model to introduce loss 3 and layer P . Since the premise of MR model is a certain market price of loss, the chapter four will use the risk-neutral probability transformation technique to get the market value of loss. Under lognormal distribution, we will use location parameter shift and proportional PH transformation to illuminate the technique. The final chapter combines the prior sections' result to deduce out the fair premium formula, and apply it to price the catastrophe insurance.