Further Results about Calibration of Longevity Risk for the Insurance BusinessReportar como inadecuado

Further Results about Calibration of Longevity Risk for the Insurance Business - Descarga este documento en PDF. Documentación en PDF para descargar gratis. Disponible también para leer online.

In life insurance business, longevity risk, i.e. the risk that the insured population lives longer than theexpected, represents the heart of the risk assessment, having significantimpact in terms of solvency capital requirements SCRs needed to front thefirm obligations. The credit crisis has shown that systemic risk as longevityrisk is relevant and that for many insurers it is actually the dominant risk.With the adoption of the Solvency II directive, a new area for insurance interms of solvency regulation has been opened up. The international guidelinesprescribe a market consistent valuation of balance sheets, where the solvencycapital requirements to be set aside are calculated according to a modularstructure. By mapping the main risk affecting the insurance portfolio, thecapital amount able to cover the liabilities corresponds to each measured risk.In Solvency II, the longevity risk is included into underwriting riskmodule. In particular, the rules propose that companies use a standard modelfor measuring the SCRs. Nevertheless, the legislation under considerationallows designing tailor-made internal models. As regards the longevity riskassessment, the regulatory standard model leads to noteworthy inconsistencies.In this paper, we propose a stochastic volatility model combinedwith a so-called coherent risk measure as the expected shortfall for measuringthe SCRs according to more realistic assumptions on future evolution oflongevity trend. Finally empirical evidence is provided.


Solvency II; Solvency Capital Requirement; Longevity Risk; Longevity Shocks; Expected Shortfall

Cite this paper

Coppola, M. and D’Amato, V. 2014 Further Results about Calibration of Longevity Risk for the Insurance Business. Applied Mathematics, 5, 653-657. doi: 10.4236-am.2014.54061.

Autor: Mariarosaria Coppola, Valeria D’Amato

Fuente: http://www.scirp.org/


Documentos relacionados