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The implementation of the Own Risk and Solvency Assessment is a critical issue raised by Pillar II of Solvency II framework. In particular the Overall Solvency Needs calculation left the Insurance companies to define an optimal…
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…
This article presents a stochastic framework to quantify the biometric risk of an insurance portfolio in solvency regimes such as Solvency II or the Swiss Solvency Test (SST). The main difficulty in this context constitutes in the proper…
As part of the new regulatory framework of Solvency II, introduced by the European Union, insurance companies are required to monitor their solvency by computing a key risk metric called the Solvency Capital Requirement (SCR). The official…
The Solvency Capital Requirement (SCR) calculation is computationally intensive, relying on the market-consistent estimation of own funds. While Solvency II prioritizes the direct valuation method, it theoretically yields the same value as…
In the paper we develop mathematical tools of quantile hedging in incomplete market. Those could be used for two significant applications: o calculating the \textbf{optimal capital requirement imposed by Solvency II} (Directive 2009/138/EC…
Using an extended version of the credit risk model CreditRisk+, we develop a flexible framework with numerous applications amongst which we find stochastic mortality modelling, forecasting of death causes as well as profit and loss…
Insurance companies make extensive use of Monte Carlo simulations in their capital and solvency models. To overcome the computational problems associated with Monte Carlo simulations, most large life insurance companies use proxy models…
We study statistical model checking of continuous-time stochastic hybrid systems. The challenge in applying statistical model checking to these systems is that one cannot simulate such systems exactly. We employ the multilevel Monte Carlo…
After several years of development, the Solvency II-project has finally been set to work in the European Union with the beginning of the year 2016. This has caused massive changes in the regional legislative supervisory acts. One new aspect…
The aim of this paper is to introduce a synthetic ALM model that catches the main specificity of life insurance contracts. First, it keeps track of both market and book values to apply the regulatory profit sharing rule. Second, it…
This paper investigates market-consistent valuation of insurance liabilities in the context of, for instance, Solvency II and to some extent IFRS 4. We propose an explicit and consistent framework for the valuation of insurance liabilities…
In a capital adequacy framework, risk measures are used to determine the minimal amount of capital that a financial institution has to raise and invest in a portfolio of pre-specified eligible assets in order to pass a given capital…
This paper sets out a framework for the valuation of insurance liabilities that is intended to be economically realistic, elementary, reasonably practically applicable, and as a special case to provide a basis for the valuation in…
Under Solvency II the computation of capital requirements is based on value at risk (V@R). V@R is a quantile-based risk measure and neglects extreme risks in the tail. V@R belongs to the family of distortion risk measures. A serious…
Several methods have been proposed in the literature to solve reliability-based optimization problems, where failure probabilities are design constraints. However, few methods address the problem of life-cycle cost or risk optimization,…
We study a static portfolio optimization problem with two risk measures: a principle risk measure in the objective function and a secondary risk measure whose value is controlled in the constraints. This problem is of interest when it is…
Organizations need to manage numerous business processes for delivering their services and products to customers. One important consideration thereby lies in the adherence to regulations such as laws, guidelines, or industry standards. In…
Protection of creditors is a key objective of financial regulation. Where the protection needs are high, i.e., in banking and insurance, regulatory solvency requirements are an instrument to prevent that creditors incur losses on their…
Any solvency regime for financial institutions should be aligned with the fundamental objectives of regulation: protecting liability holders and securing the stability of the financial system. The first objective leads to consider…