The determination of the capital requirements represents the first Pillar of Solvency II. In this framework the Solvency Capital Requirement (SCR) is defined as the amount of capital that an insurer needs in order to remain viable in the market and maintain its default probability below a certain level. The main purpose of the new solvency regulation is to obtain more realistic modelling and assessment of the different risks insurance companies are exposed to. According to this regulation the SCR standard calculation is based on a modular approach where the overall risk is split into several modules and submodules for which SCRs are computed separately and then aggregated according to pre-specified correlation matrices. Longevity risk is one of the major risks that an insurance company or a pension fund will have to deal with and it is expected that its importance will grow in the near future. In agreement with these considerations in Solvency II standard formula longevity risk is explicitly considered as a sub-module of the life underwriting risk module. In this paper we will refer exactly to the sub-module of longevity risk and, in a risk management perspective, we suggest a multiperiod approach for calculating the corresponding SCR, that is, we estimate at issue time the solvency adequacy along the overall portfolio contract duration. We propose a backtesting framework for measuring the consistency of the SCR calculations for life insurance policies. In particular to evaluate the performances of the SCR calculation methodologies we quantify the convergence of the SCR forecasts through the time. Finally we provide graphical analysis and numerical evidences.
Tools for testing the solvency capital requirement for Life Insurance / Coppola, Mariarosaria; D’Amato, V.. - (2011). (Intervento presentato al convegno XII Ibero-Italian Congress of Financial and Actuarial Mathematics tenutosi a Lisbona nel 7-9 Luglio 2011).
Tools for testing the solvency capital requirement for Life Insurance
COPPOLA, MARIAROSARIA;
2011
Abstract
The determination of the capital requirements represents the first Pillar of Solvency II. In this framework the Solvency Capital Requirement (SCR) is defined as the amount of capital that an insurer needs in order to remain viable in the market and maintain its default probability below a certain level. The main purpose of the new solvency regulation is to obtain more realistic modelling and assessment of the different risks insurance companies are exposed to. According to this regulation the SCR standard calculation is based on a modular approach where the overall risk is split into several modules and submodules for which SCRs are computed separately and then aggregated according to pre-specified correlation matrices. Longevity risk is one of the major risks that an insurance company or a pension fund will have to deal with and it is expected that its importance will grow in the near future. In agreement with these considerations in Solvency II standard formula longevity risk is explicitly considered as a sub-module of the life underwriting risk module. In this paper we will refer exactly to the sub-module of longevity risk and, in a risk management perspective, we suggest a multiperiod approach for calculating the corresponding SCR, that is, we estimate at issue time the solvency adequacy along the overall portfolio contract duration. We propose a backtesting framework for measuring the consistency of the SCR calculations for life insurance policies. In particular to evaluate the performances of the SCR calculation methodologies we quantify the convergence of the SCR forecasts through the time. Finally we provide graphical analysis and numerical evidences.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
