Opportunity Cost in Insurance
Statistical Finance
2025-11-19 v1
Abstract
We develop a formalism for insurance profit optimisation for the in-force business constraint by regulatory and risk policy related requirements. This approach is applicable to Life, P&C and Reinsurance businesses and applies in all regulatory frameworks with a solvency requirement defined in the form of a solvency ratio, notably Solvency II and the Swiss Solvency Test. We identify the optimal asset allocation for profit maximisation within a pre-defined risk appetite and deduce the annual opportunity cost faced by the insurance company.
Cite
@article{arxiv.2511.13959,
title = {Opportunity Cost in Insurance},
author = {Jan Maelger},
journal= {arXiv preprint arXiv:2511.13959},
year = {2025}
}
Comments
9 pages