Cocozza, Rosa and Di Lorenzo, Emilia (2007): A Dynamic Solvency Approach for Life Insurance.
Download (178kB) | Preview
The paper investigates risk management processes in life insurance, in a perspective consistent with the framework of Solvency II. The paper starts with the breakdown of the business dynamics. This analysis provides for a complete depiction of risk and value driver within life business. The corresponding map is then put into the solvability context, in order to formally identify the equilibrium conditions. Considerations about the technical equilibrium of an insurance portfolio and the financial regulation lead to a dynamic system of solvency assessment. The formal model is applied to a life annuity cohort in a stochastic context in order to exemplify the potential of the model, especially referred to the need to frame solvency assessment in a dynamic perspective.
|Item Type:||MPRA Paper|
|Original Title:||A Dynamic Solvency Approach for Life Insurance|
|Keywords:||Life insurance, financial risk, insolvency risk, capital adequacy, financial regulation|
|Subjects:||G - Financial Economics > G2 - Financial Institutions and Services > G22 - Insurance ; Insurance Companies ; Actuarial Studies
G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation
|Depositing User:||Rosa Cocozza|
|Date Deposited:||11 Jan 2011 21:35|
|Last Modified:||17 Apr 2016 20:43|
Babbel, D.F., Gold, J., Merrill, C.B., 2002. Fair value of liabilities: the financial economics perspective. North American actuarial journal 6 (1), 12-27.
Babbel, D.F., Merrill C.B., 1998. Economic valuation models for insurers. North American actuarial journal 2 (3), 1-17.
Babbel, D.F., Santomero, A.M., 1997. Risk management by insurers: an analysis of the process. Journal of risk and insurance 64, 231-270.
Berger, A.N., Herring, R.J., Szego, G.P., 1995. The role of capital in financial institutions. Journal of banking and finance 19, 393-430.
BIS Basle Committee on Banking Supervision, 2001. The new Basle capital accord. BIS, January.
Cocozza, R., 2000. La gestione del rischio di tasso di interesse nelle assicurazioni del ramo vita. CEDAM, Padova.
Coppola, M., Di Lorenzo, E., Sibillo, M., 2003. Stochastic Analysis in Life Office Management: Applications to Large Annuity Portfolios. to appear on Applied Stochastic Models in Business and Industry 19, pp. 31-43.
Di Lorenzo, E., Sibillo, M., Tessitore, G., 1999: A Stochastic Model for Financial Evaluations. Applications to Actuarial Contracts. Applied Stochastic Models in Business and Industry 15, pp. 269-275.
Girard, L.N., 2000. Market value of insurance liabilities: reconciling the actuarial appraisal and option pricing methods. North American actuarial journal 4 (1), 31-62.
Elton, E.J., Gruber, M.J., 1992. Optimal investment strategies with investor liabilities. Journal of banking and finance 16, 869-890.
Hairs, C. J., Belsham, D. J., Bryson, N. M., George, C. M., Hare, D. J. P., Smith, D. A, Thompson, S., 2001. Fair valuation of liabilities. Institute of Actuaries and Faculty of Actuaries, November.
IAA Solvency Working Party, 2002. Report of solvency working party prepared for IAA Insurance Regulation Committee. IAA, February.
IAIS Solvency & Actuarial Issues Subcommittee, 2000. On solvency, solvency assessments and actuarial issues. IAIS, March.
IAIS Solvency & Actuarial Issues Subcommittee, 2002. Principles on capital adequacy and solvency. IAIS, January.
IASB Steering Committee, 1999. Insurance issue paper. IASB, December. Knight, K., 2000. Mathematical Statistics. Chapman & Hall/CRC, Boca Raton, Florida.
KPMG, 2002. Study into the methodologies to assess the overall financial position of an insurance undertaking from the perspective of prudential supervision. European Commission, May.
London Working Group, 2002. Prudential supervision of insurance undertakings (Sharma Report). Conference of insurance supervisory services of the member states of the EU, December.
Melsa, J.L., Sage, A.P., 1973. An Introduction to Probability and Stochastic Processes. Prentice-Hall, New Jersey.
Parker, G., 1994. Limiting Distribution of the Present Value of a Portfolio. Astin Bulletin 24, No. 1, pp. 47-60.
Parker, G., 1997a. A Portfolio of Endowment Policies and its Limiting Distribution. VIII International Symposium on Applied Stochastic Models and Data Analysis, Anacapri, pp. 67-75.
Parker, G., 1997b. Insolvency Risk: Tractable Model, Simulation and Scenario Testing. Technical Report.
Parker, G., 1997c. Stochastic analysis of the interaction between investment and insurance risks. North American actuarial journal 1 (2), 55-84.
Vanderhoof, I.T., Altman E.I., (eds.) 1998. The fair value of insurance liabilities. Kluwer Academic Publishers, Boston. Dordrecht, London.