Matching Premium. New approach to calculate technical provisions life insurance companies

Abstract

Since the new regulatory framework requires us to value the assets and liabilities of the entities at market value; Why the present value of liabilities should upgrade to a riskfree rate, without considering the result which represents the different typology of risk management of the assigned assets to policies that differently assumes each entity? Solvency II, Level 2 specifically, includes the concept of Matching Premium in calculating liability obligations of insurance companies, as a positive spread rewards good liquidity risk management, allowing it to update the value of the future obligations of the entities to a higher discount rate which means a lower amount provisioned. Including the matching premium will prevent exposure to fluctuations in daily bond market as a result of insurers remain, a priori, their assets until maturity. This is what some euro zone countries such as Spain, have discussed following the publication of the Directive. The aim of the thesis is disaggregate their calculation, as well as the impact and the conclusions for/against the new calculation model.