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A market-consistent framework for the fair evaluation of insurance contracts under Solvency II

Author

Listed:
  • Anna Maria Gambaro

    (Università del Piemonte Orientale)

  • Riccardo Casalini

    (UnipolSai Assicurazioni S.p.A.)

  • Gianluca Fusai

    (Università del Piemonte Orientale
    City University)

  • Alessandro Ghilarducci

    (Deloitte Consulting Srl, Finance & Risk)

Abstract

The entry into force of the Solvency II regulatory regime is pushing insurance companies in engaging into market consistence evaluation of their balance sheet, mainly with reference to financial options and guarantees embedded in life with-profit funds. The robustness of these valuations is crucial for insurance companies in order to produce sound estimates and good risk management strategies, in particular, for liability-driven products such as with-profit saving and pension funds. This paper introduces a Monte Carlo simulation approach for evaluation of insurance assets and liabilities, which is more suitable for risk management of liability-driven products than common approaches generally adopted by insurance companies, in particular, with respect to the assessment of valuation risk.

Suggested Citation

  • Anna Maria Gambaro & Riccardo Casalini & Gianluca Fusai & Alessandro Ghilarducci, 2019. "A market-consistent framework for the fair evaluation of insurance contracts under Solvency II," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 42(1), pages 157-187, June.
    • Handle: RePEc:spr:decfin:v:42:y:2019:i:1:d:10.1007_s10203-019-00242-1
    DOI: 10.1007/s10203-019-00242-1
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