Prudential margins

Document description

Anyone reading this paper to discover what margin on reserves would be prudent is going to be disappointed. There is no 'correct' answer to this question and we do not presume to offer one. The prime purpose is to discuss the philosophical issues and so to promote discussion both within and outside the actuarial profession. In particular, we hope that this will be of interest to regulators and insurance company management as well as those directly involved in reserving. We have limited the discussion to margins on reserves, although much of it can be extended to margins on premiums, asset valuation etc. Indeed, the margins should be considered in the wider context of the risk taken in the company as a whole, not leasthe asset matching.