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Stress Scenario Generation for Solvency and Risk Management
Year Of Publication: 2014
Month Of Publication: March
Resource Link: Click here to open
Pages: 25
Download Count: 0
View Count: 1805
Comment Num: 0
Language: English
Source: working paper
Who Can Read: Free
Date: 4-21-2014
Publisher: Administrator
We derive worst-case scenarios in the case where the interest rate and the various transition intensities in a life insurance model are mutually dependent. Examples of this dependence are that surrender intensities and interest rates are high at the same time, that mortality intensities of a policyholder as active and disabled, respectively, are low at the same time, and that mortality intensities of the policyholders in a portfolio are low at the same time. The set from which the worst-case scenario is taken reflects the dependence structure and allows us to relate the worst-case scenario-based reserve, qualitatively, to a Value-at-Risk-based calculation of solvency capital requirements. This brings out perspectives for our results in relation to qualifying the standard formula of Solvency II or using a scenario-based approach in internal models. The fact that our worst-case scenario is deterministic and not adapted to the development of the portfolio makes the results particularly powerful for certain applications but also draws on methodological advancements. The formalistic results are exemplified in a series of numerical studie
Steffensen, Mogens Sign in to follow this author
C_hristiansen, Marcus C. Sign in to follow this author
Henriksen, Lars F. B. Sign in to follow this author
Schomacker, Kristian Juul Sign in to follow this author
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