IDEAS home Printed from https://ideas.repec.org/a/bla/rmgtin/v7y2004i1p41-52.html
   My bibliography  Save this article

New Risk‐Based Capital Standards in the European Union: A Proposal Based on Empirical Data

Author

Listed:
  • Hato Schmeiser

Abstract

In response to criticism concerning the current solvency system, the European Commission is developing new rules for insurance companies operating in the member states of the European Union (EU). Under this so‐called Solvency II concept, an insurer is allowed to verify its solvency by using an internal risk management model previously approved by the regulatory authority. In this article we develop such an internal risk management approach for property‐liability insurers that is based on dynamic financial analysis (DFA). The proposed concept uses a simulation technique and models the central risk factors from the investment and underwriting areas of an insurance company. On the basis of the data provided by a German insurer, the ruin probabilities under different scenarios and varying planning horizons are calculated.

Suggested Citation

  • Hato Schmeiser, 2004. "New Risk‐Based Capital Standards in the European Union: A Proposal Based on Empirical Data," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 7(1), pages 41-52, March.
    • Handle: RePEc:bla:rmgtin:v:7:y:2004:i:1:p:41-52
    DOI: j.1098-1616.2004.00035.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1098-1616.2004.00035.x
    Download Restriction: no
    File URL: https://libkey.io/j.1098-1616.2004.00035.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Powers, Michael R., 1995. "A theory of risk, return and solvency," Insurance: Mathematics and Economics, Elsevier, vol. 17(2), pages 101-118, October.
    2. Lowe, Stephen P. & Stanard, James N., 1997. "An Integrated Dynamic Financial Analysis and Decision Support System for a Property Catastrophe Reinsurer1," ASTIN Bulletin, Cambridge University Press, vol. 27(2), pages 339-371, November.
    3. Douglas Hodes & Sholom Feldblum & Antoine Neghaiwi, 1999. "The Financial Modeling of Property-Casualty Insurance Companies," North American Actuarial Journal, Taylor & Francis Journals, vol. 3(3), pages 41-69.
    4. Hans Gerber & Elias Shiu, 1998. "On the Time Value of Ruin," North American Actuarial Journal, Taylor & Francis Journals, vol. 2(1), pages 48-72.
    5. Dieter Farny, 1997. "Security of Insurers: The American Risk Based Capital Model versus the European Model of Solvability for Property and Casualty Insurers," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 22(1), pages 69-75, January.
    6. Kaufmann, Roger & Gadmer, Andreas & Klett, Ralf, 2001. "Introduction to Dynamic Financial Analysis," ASTIN Bulletin, Cambridge University Press, vol. 31(1), pages 213-249, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Eling, Martin & Gatzert, Nadine & Schmeiser, Hato, 2009. "Minimum standards for investment performance: A new perspective on non-life insurer solvency," Insurance: Mathematics and Economics, Elsevier, vol. 45(1), pages 113-122, August.
    2. Martin Eling & Hato Schmeiser & Joan T. Schmit, 2007. "The Solvency II Process: Overview and Critical Analysis," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 10(1), pages 69-85, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Peter Blum & Michel Dacorogna, 2003. "Dynamic Financial Analysis - Understanding Risk and Value Creation in Insurance," Risk and Insurance 0306002, University Library of Munich, Germany.
    2. Martin Eling & Denis Toplek, 2009. "Modeling and Management of Nonlinear Dependencies–Copulas in Dynamic Financial Analysis," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(3), pages 651-681, September.
    3. Martin Eling & Thomas Parnitzke, 2007. "Dynamic Financial Analysis: Classification, Conception, and Implementation," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 10(1), pages 33-50, March.
    4. Mousa, A.S. & Pinheiro, D. & Pinto, A.A., 2016. "Optimal life-insurance selection and purchase within a market of several life-insurance providers," Insurance: Mathematics and Economics, Elsevier, vol. 67(C), pages 133-141.
    5. Asier Garayeta & J. Iñaki De la Peña & Eduardo Trigo, 2022. "Towards a Global Solvency Model in the Insurance Market: A Qualitative Analysis," Sustainability, MDPI, vol. 14(11), pages 1-18, May.
    6. Zan Yu & Lianzeng Zhang, 2024. "Computing the Gerber-Shiu function with interest and a constant dividend barrier by physics-informed neural networks," Papers 2401.04378, arXiv.org.
    7. Franck Adékambi & Essodina Takouda, 2020. "Gerber–Shiu Function in a Class of Delayed and Perturbed Risk Model with Dependence," Risks, MDPI, vol. 8(1), pages 1-25, March.
    8. Min Song & Rong Wu & Xin Zhang, 2008. "Total duration of negative surplus for the dual model," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 24(6), pages 591-600, November.
    9. Zhang, Aili & Li, Shuanming & Wang, Wenyuan, 2023. "A scale function based approach for solving integral-differential equations in insurance risk models," Applied Mathematics and Computation, Elsevier, vol. 450(C).
    10. Meng, Hui & Siu, Tak Kuen, 2011. "On optimal reinsurance, dividend and reinvestment strategies," Economic Modelling, Elsevier, vol. 28(1-2), pages 211-218, January.
    11. Patrick Krieger & Carsten Lausberg, 2021. "Entscheidungen, Entscheidungsfindung und Entscheidungsunterstützung in der Immobilienwirtschaft: Eine systematische Literaturübersicht [Decisions, decision-making and decisions support systems in r," Zeitschrift für Immobilienökonomie (German Journal of Real Estate Research), Springer;Gesellschaft für Immobilienwirtschaftliche Forschung e. V., vol. 7(1), pages 1-33, April.
    12. Wu, Rong & Wang, Guojing & Zhang, Chunsheng, 2005. "On a joint distribution for the risk process with constant interest force," Insurance: Mathematics and Economics, Elsevier, vol. 36(3), pages 365-374, June.
    13. Dutang, C. & Lefèvre, C. & Loisel, S., 2013. "On an asymptotic rule A+B/u for ultimate ruin probabilities under dependence by mixing," Insurance: Mathematics and Economics, Elsevier, vol. 53(3), pages 774-785.
    14. Young, Virginia R., 2017. "Purchasing casualty insurance to avoid lifetime ruin," Insurance: Mathematics and Economics, Elsevier, vol. 77(C), pages 133-142.
    15. Anna Castañer & M.Mercè Claramunt & Maite Mármol, 2014. "Some optimization and decision problems in proportional reinsurance," UB School of Economics Working Papers 2014/310, University of Barcelona School of Economics.
    16. Feng, Runhuan & Volkmer, Hans W., 2012. "Modeling credit value adjustment with downgrade-triggered termination clause using a ruin theoretic approach," Insurance: Mathematics and Economics, Elsevier, vol. 51(2), pages 409-421.
    17. Psarrakos, Georgios & Politis, Konstadinos, 2008. "Tail bounds for the joint distribution of the surplus prior to and at ruin," Insurance: Mathematics and Economics, Elsevier, vol. 42(1), pages 163-176, February.
    18. Zied Ben-Salah & H'el`ene Gu'erin & Manuel Morales & Hassan Omidi Firouzi, 2014. "On the Depletion Problem for an Insurance Risk Process: New Non-ruin Quantities in Collective Risk Theory," Papers 1406.6952, arXiv.org.
    19. Yuen, Kam C. & Wang, Guojing & Wu, Rong, 2006. "On the renewal risk process with stochastic interest," Stochastic Processes and their Applications, Elsevier, vol. 116(10), pages 1496-1510, October.
    20. Kolkovska, Ekaterina T. & Martín-González, Ehyter M., 2016. "Gerber–Shiu functionals for classical risk processes perturbed by an α-stable motion," Insurance: Mathematics and Economics, Elsevier, vol. 66(C), pages 22-28.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:rmgtin:v:7:y:2004:i:1:p:41-52. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=1098-1616 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.