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A bridge between Local GAAP and Solvency II frameworks to quantify Capital Requirement for demographic risk

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  • Gian Paolo Clemente
  • Francesco Della Corte
  • Nino Savelli

Abstract

The paper provides a stochastic model useful for assessing the capital requirement for demographic risk. The model extends to the market consistent context classical methodologies developed in a local accounting framework. In particular we provide a unique formulation for different non-participating life insurance contracts and we prove analytically that the valuation of demographic profit can be significantly affected by the financial conditions in the market. A case study has been also developed considering a portfolio of life insurance contracts. Results prove the effectiveness of the model in highlighting main drivers of capital requirement evaluation, also compared to local GAAP framework.

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  • Gian Paolo Clemente & Francesco Della Corte & Nino Savelli, 2021. "A bridge between Local GAAP and Solvency II frameworks to quantify Capital Requirement for demographic risk," Papers 2107.10891, arXiv.org.
    • Handle: RePEc:arx:papers:2107.10891
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    References listed on IDEAS

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    3. Vasicek, Oldrich Alfonso, 1977. "Abstract: An Equilibrium Characterization of the Term Structure," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(4), pages 627-627, November.
    4. Olivieri, Annamaria & Pitacco, Ermanno, 2008. "Assessing the cost of capital for longevity risk," Insurance: Mathematics and Economics, Elsevier, vol. 42(3), pages 1013-1021, June.
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    6. Barigou, Karim & Chen, Ze & Dhaene, Jan, 2019. "Fair dynamic valuation of insurance liabilities: Merging actuarial judgement with market- and time-consistency," Insurance: Mathematics and Economics, Elsevier, vol. 88(C), pages 19-29.
    7. Hári, Norbert & De Waegenaere, Anja & Melenberg, Bertrand & Nijman, Theo E., 2008. "Longevity risk in portfolios of pension annuities," Insurance: Mathematics and Economics, Elsevier, vol. 42(2), pages 505-519, April.
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    Cited by:

    1. Anna Rita Bacinello, 2022. "Special Issue “Quantitative Risk Assessment in Life, Health and Pension Insurance”," Risks, MDPI, vol. 10(4), pages 1-2, March.
    2. Francesco Della Corte & Gian Paolo Clemente & Nino Savelli, 2023. "A cohort-based Partial Internal Model for demographic risk," Papers 2307.03090, arXiv.org.

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