The Fair Value of Insurance Liabilities
This book explores theoretical and practical implications of reflecting the fair value of liabilities for insurance companies. In addition, the contributions discuss the disclosure of these values to the financial and regulatory communities and auditing f
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The New York University Salomon Center Series on Financial Markets and Institutions VOLUME 1
The titles published in this series are listed at the end of this volume.
THE FAIR VALUE OF INSURANCE LIABILITIES
Edited by
IRWIN T. VANDERHOOF and EDWARD I. ALTMAN Stern School of Business New York University
STERN• Leonard N. Stem School of Business
'
SPRINGER-SCIENCE+BUSINESS MEDIA, B.V.
A C.I.P. Catalogue record for this book is available from the Library of Congress
ISBN 978-1-4419-5178-6 DOI 10.1007/978-1-4757-6732-2
ISBN 978-1-4757-6732-2 (eBook)
Printed an acid-free paper
Ali Rights Reserved © 1998 Springer Science+Business Media Dordrecht Originally published by Kluwer Academic Publishers in 1998 No part of the material protected by this copyright notice may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without written permission from the copyright owner.
Table of contents Introduction Irwin T. Vanderhoof .
vii
Welcome Frederick D.S. Choi 1.
2. 3.
XVll
Background on fair value accounting of insurance company assets and liabilities Robert C. Wilkins . . . . . . . . . . . . . . .
1
Comparison of methods for fair-value life insurance liabilities Arnold A. Dicke . . . . . . . . . . . . . . . .
7
Fair valuation of life insurance company liabilities Douglas C. Doll et a/. . . . . . . . . . .
21
Discussion David F. Babbel
4.
. .
115
Experience in implementing fair value of insurance liabilities Dennis L. Carr . . . . . . . . . . . . . . . . .
127
Discussion J. Peter Duran . . . Joseph E. Crowne . .
5.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
133 137
Allowing for asset, liability, and business risk in the valuation of a life company Shyam J.B. Mehta . . . . . . . . . . . . . . . .
143
Discussion 6.
Phelim Boyle
197
A market-value accounting framework for insurance companies Mark Griffin . . . . . . . . . . . . . . .
201
Discussion 7.
Joan Lamm-Tennant .
211
Option adjusted value of the firm David N. Becker . . . . . .
215
Discussion
289
Kim Staking
v
vi 8.
9.
Table of contents The cash flow method for valuing liabilities in Canada Allan Brender . . . . . . . . . . . . . . .
297
The derivation and application of accounting standards to the market value of liabilities Christopher D. O'Brien . . . . . . . . . . . . . .
303
The indexed discount rate method for fair valuation of liabilities S. Michael McLaughlin . . . . . . . . . . . . . . .
331
Is Paul vs. Virginia dead? Krzysztof M. Ostaszewski
351
Remarks Joan Lamm-Tennant .
361
List of contributors
363
Index
371
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IRWIN T. VANDERHOOF New York University
Introduction: fair value of insurance liabilities
The formal papers in this volume are responses to a call for papers on the subject of 'market' value of insurance liabilities sponsored by the Society of Actuaries. 'Fair value' and 'market value' are viewed as equivalent ideas by FASB. The discussions
