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Gérard de LA MARTINIERE Chairman FFSA Monte-Carlo Rendezvous 9 September 2003 , Monte-Carlo

Gérard de LA MARTINIERE Chairman FFSA Monte-Carlo Rendezvous 9 September 2003 , Monte-Carlo. CAUSES and LONG TERM CONSEQUENCES of ASSET VOLATILITY on INSURANCE. Market situation. Stock price fall & overreaction of insurance. Three main over/underreaction turning points.

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Gérard de LA MARTINIERE Chairman FFSA Monte-Carlo Rendezvous 9 September 2003 , Monte-Carlo

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  1. Gérard de LA MARTINIEREChairmanFFSAMonte-Carlo Rendezvous9 September 2003,Monte-Carlo CAUSES and LONG TERM CONSEQUENCES of ASSET VOLATILITY on INSURANCE

  2. Market situation

  3. Stock price fall & overreaction of insurance • Three main over/underreaction turning points

  4. An exuberance not totally irrational • … but a turning point in autumn 2000

  5. Price’s correlation with expected return • … particularly during the fall of stock prices

  6. Expected return driven by interest rate • … but its rise after mid 2000 is not

  7. Risk premium driven by business sentiment • … but its rise since 2002 is not

  8. Decomposition of price variation since 1993 • …expected return explains most price variations

  9. Decomposition of expected return • …underlines the crucial role of the risk premium

  10. Specificity of insurance market situation

  11. Recent overreaction of insurance quotation • … overreaction during the recent falling episode

  12. Growing expected return gap vs market • … exploding between mid 2002 & mid 2003

  13. Decomposition of price variation since 1993 • … negative contribution of the risk premium

  14. A not foreseeable overreaction

  15. Perspectives

  16. Whole market perspectives • … clear upturn perspectives

  17. Insurance market perspectives • … upturn so as for the whole market

  18. Conclusions What lessons from the current financial crisis ?

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