Solvency requirement for long term guarantee: risk measure versus probability of ruin

Solvency requirements are based on the idea that risk can be accepted if enough capital is present. The determination of this minimum level of capital depends on the way to consider and measure the underlying risk. Apart from the kind of risk measure used, an important factor is the way to integrate...

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Bibliographic Details
Published inEuropean actuarial journal Vol. 8; no. Suppl 1; pp. 9 - 24
Main Author Devolder, Pierre
Format Journal Article
LanguageEnglish
Published Berlin/Heidelberg Springer Berlin Heidelberg 01.12.2018
Springer Nature B.V
Subjects
Actuarial science
Applications of Mathematics
Asset allocation
Brownian motion
Economics
Equity
Equity funds
Financial Services
Game Theory
Insurance companies
Interest rates
Investment policy
Liability
Life insurance
Mathematics
Mathematics and Statistics
Original Research Paper
Probability
Quantitative Finance
Social and Behav. Sciences
Solvency
Risk measure
Solvency capital
Dynamic risk measure
Probability of ruin
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Summary:Solvency requirements are based on the idea that risk can be accepted if enough capital is present. The determination of this minimum level of capital depends on the way to consider and measure the underlying risk. Apart from the kind of risk measure used, an important factor is the way to integrate time in the process. This topic is particularly important for long term liabilities such as life insurance or pension benefits. In this paper we study the market risk of a life insurer offering a fixed guaranteed rate on a certain time horizon and investing the premium in a risky fund. We develop and compare various risk measurements based either on a single point analysis or on a continuous time test. Dynamic risk measures are also considered.
ISSN:2190-9733
2190-9741
DOI:10.1007/s13385-011-0036-y