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Title: A correlation sensitivity analysis of non-life underwriting risk in solvency capital requirement estimation
Author: Bermúdez, Lluís
Ferri Vidal, Antoni
Guillén, Montserrat
Keywords: Risc (Economia)
Avaluació del risc
Mètode de Montecarlo
Correlació (Estadística)
Risk assessment
Monte Carlo method
Correlation (Statistics)
Issue Date: Jan-2013
Publisher: Cambridge University Press
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: ASTIN Bulletin , 2013, vol. 43, num. 01, p. 21-37
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ISSN: 0515-0361
Appears in Collections:Articles publicats en revistes (Matemàtica Econòmica, Financera i Actuarial)
Articles publicats en revistes (Econometria, Estadística i Economia Aplicada)

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