Performance Measurement in the Life Insurance Industry: An Asset-Liability Perspective

28 Pages Posted: 11 Nov 2019 Last revised: 20 Nov 2019

See all articles by Alexander Braun

Alexander Braun

Institute of Insurance Economics (University of St. Gallen)

Florian Schreiber

University of St. Gallen - I.VW-HSG

Date Written: November 18, 2019

Abstract

Established risk-adjusted investment performance measures such as the Sharpe, the Sortino or the Calmar Ratio have been developed with an exclusive focus on the mutual and hedge fund industries. Consequently, they are less suited for liability-driven investors such as life insurance companies, whose portfolio choice is materially affected by the substantial interest rate sensitivity of their long-term contractual obligations. In order to tackle this limitation, we introduce the Asset-Liability Sharpe Ratio, which is theoretically motivated, computable based on publicly-available data, incentive compatible, and relevant. Hence, it should be a valuable new tool for performance assessment in the life insurance industry.

Keywords: Asset-Liability Management, Life Insurance, Risk-Adjusted Performance Measurement, Rank Correlation

JEL Classification: G11; G22

Suggested Citation

Braun, Alexander and Schreiber, Florian, Performance Measurement in the Life Insurance Industry: An Asset-Liability Perspective (November 18, 2019). Available at SSRN: https://ssrn.com/abstract=3478281 or http://dx.doi.org/10.2139/ssrn.3478281

Alexander Braun (Contact Author)

Institute of Insurance Economics (University of St. Gallen) ( email )

Tannenstrasse 19
St. Gallen, 9000
Switzerland

Florian Schreiber

University of St. Gallen - I.VW-HSG ( email )

Tannenstrasse 19
St. Gallen, 9010
Switzerland

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