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Robust evaluation of SCR for participating life insurances under Solvency II

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  • Hainaut, Donatien
  • Devolder, Pierre
  • Pelsser, Antoon

Abstract

This article proposes a robust framework to evaluate the solvency capital requirement (SCR) of a participating life insurance with death benefits. The preference for robustness arises from the ambiguity caused by the market incompleteness, model shortcomings and parameters misspecifications. To incorporate the uncertainty in the procedure of evaluation, we consider a set of potential equivalent pricing measures in the neighborhood of the real one. In this framework, closed form expressions for the net asset value (NAV) and for its moments are found. The SCR is next approximated by the Value at Risk of Gaussian or normal inverse Gaussian (NIG) random variables, approaching the NAV distribution and fitted by moments matching.
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Suggested Citation

  • Hainaut, Donatien & Devolder, Pierre & Pelsser, Antoon, 2018. "Robust evaluation of SCR for participating life insurances under Solvency II," LIDAM Reprints ISBA 2018011, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    • Handle: RePEc:aiz:louvar:2018011
    Note: In : Insurance: Mathematics and Economics, vol. 79, p. 107-123 (2018)
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    References listed on IDEAS

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    Cited by:

    1. Philippe ARTZNER & Karl-Theodor EISELE & Thorsten SCHMIDT, 2022. "Insurance-Finance Arbitrage," Working Papers of LaRGE Research Center 2022-09, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    2. Flores, Eduardo & de Carvalho, João Vinicius França & Sampaio, Joelson Oliveira, 2021. "Impact of interest rates on the life insurance market development: Cross-country evidence," Research in International Business and Finance, Elsevier, vol. 58(C).
    3. Shuai Yang & Kenneth Q. Zhou, 2023. "On Risk Management of Mortality and Longevity Capital Requirement: A Predictive Simulation Approach," Risks, MDPI, vol. 11(12), pages 1-18, November.

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