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Some Forms of Risk Regulation in Solvency II

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  • Tomáš Cipra
  • Radek Hendrych

Abstract

The contribution deals with the risk regulation in the framework of Solvency II, which is the new regulatory system in insurance valid in majority of the EU countries since 2016. It concentrates on the underwriting risk (in particular, on the reserve risk) and on the counterparty default risk (i.e. mainly on the reinsurers' default risk), since such risks are crucial for insurance activities. Various actuarial approaches to the underwriting risk applied by subjects respected by insurance regulators and supervisors are surveyed. Moreover, one of them suggests by means of a real data example a simplified approach to the reserve risk, which may be appreciated in practice just for its simplicity. As to the counterparty default risk, the paper presents a method that can be suitable when the reinsurers form a small group of heterogeneous subjects imperilled by a common shock as a financial crisis or a natural catastrophe; this methodological approach is also demonstrated by a numerical example.

Suggested Citation

  • Tomáš Cipra & Radek Hendrych, 2017. "Some Forms of Risk Regulation in Solvency II," Prague Economic Papers, Prague University of Economics and Business, vol. 2017(6), pages 722-743.
    • Handle: RePEc:prg:jnlpep:v:2017:y:2017:i:6:id:638:p:722-743
    DOI: 10.18267/j.pep.638
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    References listed on IDEAS

    as
    1. Radek Hendrych & Tomáš Cipra, 2015. "Econometric Model of the Czech Life Insurance Market," Prague Economic Papers, Prague University of Economics and Business, vol. 2015(2), pages 173-191.
    2. Mack, Thomas, 1993. "Distribution-free Calculation of the Standard Error of Chain Ladder Reserve Estimates," ASTIN Bulletin, Cambridge University Press, vol. 23(2), pages 213-225, November.
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    Citations

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    Cited by:

    1. Krystian Szczęsny & Stanisław Wanat & Anna Denkowska, 2023. "Solvency II and diversification effect for non-life premium and reserves risk: new results based on non-parametric copulas," Risk Management, Palgrave Macmillan, vol. 25(3), pages 1-26, September.

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    More about this item

    Keywords

    risk regulation; Solvency II; underwriting risk; reserve risk; technical provisions; counterparty default risk; actuarial methods;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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