A correlation sensitivity analysis of non-life underwriting risk in solvency capital requirement estimation
Bermúdez, Lluís (Universitat de Barcelona. Departament de Matemàtica Financera i Actuarial)
Ferri Vidal, Antoni (Universitat de Barcelona. Departament d'Econometria)
Guillén, Montserrat (Universitat de Barcelona. Departament d'Econometria)
Xarxa de Referència en Economia Aplicada (XREAP)

Imprint:	Xarxa de Referència en Economia Aplicada (XREAP) 2011
Description:	30 p.
Abstract:	This paper analyses the impact of using different correlation assumptions between lines of business when estimating the risk-based capital reserve, the Solvency Capital Requirement (SCR), under Solvency II regulations. A case study is presented and the SCR is calculated according to the Standard Model approach. Alternatively, the requirement is then calculated using an Internal Model based on a Monte Carlo simulation of the net underwriting result at a one-year horizon, with copulas being used to model the dependence between lines of business. To address the impact of these model assumptions on the SCR we conduct a sensitivity analysis. We examine changes in the correlation matrix between lines of business and address the choice of copulas. Drawing on aggregate historical data from the Spanish non-life insurance market between 2000 and 2009, we conclude that modifications of the correlation and dependence assumptions have a significant impact on SCR estimation.
Rights:	Aquest document està subjecte a una llicència d'ús de Creative Commons, amb la qual es permet copiar, distribuir i comunicar públicament l'obra sempre que se'n citin l'autor original, la universitat i la xarxa i no se'n faci cap ús comercial ni obra derivada, tal com queda estipulat en la llicència d'ús
Language:	Anglès
Series:	Xarxa de Referència en Economia Aplicada (XREAP). Documents de treball de la Xarxa de Referència en Economia Aplicada (XREAP)
Series:	XREAP ; 2011-12
Document:	Working paper
Subject:	Solvency II ; Solvency Capital Requirement ; Standard Model ; Internal Model ; Monte Carlo simulation ; Copulas ; Risk (Insurance) ; Insurance ; Assegurances ; Risc (Assegurances) ; Mètode de Montecarlo

30 p, 280.5 KB

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Research literature > Studies