For a life insurer, even if profitable business is written, the value of the company may appear to worsen (when viewed from a regulatory basis, for example) because of new business strain. This is a concept dealt with regularly by actuaries. New business strain occurs because the initial outgoings (such as commission, expenses, reserves, etc.) wil...
Found on
http://en.wikipedia.org/wiki/New_business_strain
The technical name given to an initial depletion of cash and/or erosion of shareholders' net assets at the moment an insurance contract is sold. This 'strain' arises because, in addition to meeting costs associated with the sale of contracts, insurance companies must make actuarial provisions at the outset of a contract that are often significantly...
Found on
http://www.aviva.com/glossary/
New business strain arises when the early years' premiums under a contract, less the initial expenses, are not sufficient to cover the provision and the required solvency margin that the company needs to set up. It mainly arises at inception, but it is possible to have further strains in subsequent years, usually lower. Rapidly growing insurance co...
Found on
http://www.encyclo.co.uk/local/20197
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