This work addresses crucial questions about the robustness of the PSDization process for applications in insurance. PSDization refers to the process that forces a matrix to become positive semidefinite. For companies using copulas to aggregate risks in their internal model, PSDization occurs...

Solvency II Standard Formula provides a methodology to recognise the risk-mitigating impact of excess of loss reinsurance treaties in premium risk modelling. We analyse the proposals of both Quantitative Impact Study 5 and Commission Delegated Regulation highlighting some inconsistencies. This...

The Solvency II directive asks insurance companies to derive their solvency capital requirement from the full loss distribution over the coming year. While this is in general computationally infeasible in the life insurance business, an application of the Least-Squares Monte Carlo (LSMC) method...

Participating life insurance contracts entitle the policyholder to participate in the company's annual surplus. Typically, they are also equipped with a surrender option that allows the policyholder to terminate the contract prior to maturity, receiving a predetermined surrender value. The...

We study the dynamics of the one-year change in P&C insurance reserves estimation by analyzing the process that leads to the ultimate risk in the case of 'fixed-sum' insurance contracts. The random variable ultimately is supposed to follow a binomial distribution. We compute explicitly various...

Longevity risk constitutes an important risk factor for life insurance companies, and it can be managed through longevity-linked securities. The market of longevity-linked securities is at present far from being complete and does not allow finding a unique pricing measure. We propose a method to...

New risk-based solvency requirements for insurance companies across European markets have been introduced by Solvency II and will come in force from 1 January 2016. These requirements, derived by a Standard Formula or an Internal Model, will be by far more risk-sensitive than the required...

Traditional participating life insurance contracts with year-to-year (cliquet-style) guarantees have come under pressure in the current situation of low interest rates and volatile capital markets, in particular when priced in a market-consistent valuation framework. In addition, such guarantees...

The primary objective of this work is to analyze model based Value-at-Risk associated with mortality risk arising from issued term life assurance contracts and to compare the results with the capital requirements for mortality risk as determined using Solvency II Standard Formula. In particular,...

Under the Solvency II regime, life insurance companies are asked to derive their solvency capital requirements from the full loss distributions over the coming year. Since the industry is currently far from being endowed with sufficient computational capacities to fully simulate these...