Actuarial Expert Witness On Insurance Capital Part 2

In Discussion of Insurance Capital as a Shared Asset, actuarial expert witness Robert Bear discusses what he describes as Donald Mango’s ground breaking work Insurance Capital as a Shared Asset:

Mr. Mango differentiates between consumptive and non-consumptive use of an asset. A consumptive use involves the transfer of a portion or share of the asset from the communal asset to an individual, such as in the reservoir water usage and fishery examples. Nonconsumptive use involves temporary, limited transfer of control which is intended to be non-depletive in that it is left intact for subsequent users. Examples of non-consumptive use indude boating on a reservoir, playing on a golf course or renting a hotel room.

While shared assets are typically used in only one of the two manners, some shared assets can be used in either a consumptive or non-consumptive manner, depending on the situation. Mr. Mango gives the example of renting a hotel room. While the intended use is benign occupancy (non-consumptive), there is the risk that a guest may fall asleep with a lit cigarette and burn down a wing of the hotel (clearly consumptive).

For more, see Casualty Actuarial Society Forum, Fall 2006.