CAS Exam 8 Study Note: Risk-Adjusted Performance Measurement for P&C Insurers

This paper was prepared as an introduction to risk-adjusted performance measurement for P&C insurance companies. A simplified numerical example is used to demonstrate how measures such as risk-adjusted return on capital (RAROC) can be used to guide certain strategic decisions. While the discussion is simplified throughout, the numerical examples are used to highlight the important challenges associated with this methodology and clarify some of its limitations.