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Title: A correlation sensitivity analysis of non-life underwriting risk in solvency capital requirement estimation [WP]
Author: Bermúdez, Lluís
Ferri Vidal, Antoni
Guillén, Montserrat
Keywords: Risc (Economia)
Avaluació del risc
Correlació (Estadística)
Risk assessment
Correlation (Statistics)
Issue Date: 2011
Publisher: Universitat de Barcelona. Institut de Recerca en Economia Aplicada Regional i Pública
Series/Report no: [WP E-IR11/13]
Abstract: This paper analyses the impact of using different correlation assumptions between lines of business when estimating the risk-based capital reserve, the Solvency Capital Requirement -SCR-, under Solvency II regulations. A case study is presented and the SCR is calculated according to the Standard Model approach. Alternatively, the requirement is then calculated using an Internal Model based on a Monte Carlo simulation of the net underwriting result at a one-year horizon, with copulas being used to model the dependence between lines of business. To address the impact of these model assumptions on the SCR we conduct a sensitivity analysis. We examine changes in the correlation matrix between lines of business and address the choice of copulas. Drawing on aggregate historical data from the Spanish non-life insurance market between 2000 and 2009, we conclude that modifications of the correlation and dependence assumptions have a significant impact on SCR estimation.
Note: Reproducció del document publicat a:
It is part of: IREA – Working Papers, 2011, IR11/13
ISSN: 2014-1254
Appears in Collections:Documents de treball (Institut de Recerca en Economia Aplicada Regional i Pública (IREA))

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