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Market equilibrium with management costs and implications for insurance accounting

Michael Florig & Olivier Gossner

The Geneva Risk and Insurance Review2024https://doi.org/10.1057/s10713-024-00107-7article
AJG 2ABDC B
Weight
0.30

What the paper says

Abstract We examine a general equilibrium investment model in which agents incur management costs for holding assets. We characterize the influence of these costs on equilibrium prices as a weighted average of these costs for market participants. We then propose a correction method for this influence in valuation procedures used under regulatory frameworks, such as Solvency II. For insurers subject to Solvency II, the accounting correction amounts to approximately €130 billion, the equivalent of 1.8% of investments or 14% of own funds. These results not only contribute to the understanding of management costs in market equilibrium, but also highlight a distortion in current practices which discourages the holding of assets that are expensive to manage and typically inaccessible directly by policyholders.

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https://doi.org/https://doi.org/10.1057/s10713-024-00107-7

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@article{michael2024,
  title        = {{Market equilibrium with management costs and implications for insurance accounting}},
  author       = {Michael Florig & Olivier Gossner},
  journal      = {The Geneva Risk and Insurance Review},
  year         = {2024},
  doi          = {https://doi.org/https://doi.org/10.1057/s10713-024-00107-7},
}

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Market equilibrium with management costs and implications for insurance accounting

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Evidence weight

0.30

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.00 × 0.4 = 0.00
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.