MODEL OF MANAGING MATHEMATICAL RESERVE OF LIFE INSURANCE

Authors

  • Mира Пешић‐Андријић Faculty of Economics, East Sarajevo

Keywords:

life insurance, mathematical reserve, managing mathematical reserve, portfolio of investment, model of optimisation investment

Abstract

Life insurance is a mutual guarantee of a large number of people with the same danger where the danger is random and can be measured and evaluated. The guarantee is represented by establishing the fund which is formed by money deposits made by endangered individuals who by doing that become members of the community of life insurance risk. These funds are used only to pay off the arranged amount to the member of the community when the insured accident occurs. A part of the financial means of the fund includes a mathematical reserve which serves as a collateral of future risks. These means are temporarily free means and are managed by the insurance company. The task of the insurance company is to keep the real value of the mathematical reserve as well as to increase its value. Therefore, the insurance company invests them, till the moment when these resources need to be used as collateral for the risk, in order to gain additional income. In order to achieve an efficient and economically efficient investment of the mathematical reserve, the original model has been designed. Designed and written model and its solution are the contribution of this paper. The key to the model provides a structure of the portfolio for investment of the mathematical reserve which ensures the required income from its investment with the minimum risk. Value added of the key to the model is the fact that it enables a post?optimal programming and simulation. This enabled a calculation of a sufficient number of investment portfolios? structures. Furthermore, this enabled a decision maker to use a high quality tool for managing risk of mathematical reserve investments as well as the overall risk of the life insurance.

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Published

2011-07-31

How to Cite

Пешић‐Андријић M. (2011). MODEL OF MANAGING MATHEMATICAL RESERVE OF LIFE INSURANCE. Acta Economica, 9(15), 79–96. Retrieved from http://ae.ef.unibl.org/index.php/AE/article/view/151

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Section

Review article