Performance Management in Insurance Firms by Using Transfer Pricing |
| |
| Authors: | René Doff,Jan Bilderbeek,Bert Bruggink,Pieter Emmen |
| |
| Affiliation: | RenéDoff is with Eureko, the largest insurance group in the Netherlands and chaired the Dutch Solvency II Working Group;phone: +31-53-4893510;fax: +31-53-4892159;e-mail: . Jan Bilderbeek is Professor of Financial Management and Accounting at the University of Twente, the Netherlands;phone: +31-53-4893510;fax: +31-53-4892159. Bert Bruggink is Professor of Financial Institutions and Markets at the University of Twente, the Netherlands;phone: +31-53-4893510;fax: +31-53-4892159. In addition, he is the Chief Financial Officer, Rabobank Group, one of the largest Dutch banking groups. Pieter Emmen is Chief Risk Officer of the Rabobank Group. This article was subject to double-blind peer review. The authors are grateful for comments from anonymous reviewers. |
| |
| Abstract: | In this article, we analyze the asset and liability management and market risk systems of insurance companies. We discuss that the current system is not goal congruent and does not satisfy necessary conditions for effective control. It follows that managers are unable to run their business effectively. We develop a transfer pricing system that allows the clear separation of underwriting and investment activities, both on the risk and return aspects. It creates the appropriate incentive schemes. We illustrate this system with an example indicating the differences in incentives between the traditional embedded value measures and the proposed funds transfer pricing system. |
| |
| Keywords: | |
|
|
