scholarly journals Generating unfavourable VaR scenarios under Solvency II with patchwork copulas

2021 ◽  
Vol 9 (1) ◽  
pp. 327-346
Author(s):  
Dietmar Pfeifer ◽  
Olena Ragulina
Keyword(s):  
Value At Risk ◽  
Insurance Industry ◽  
Solvency Ii ◽  
Two Dimensions ◽  
Insurance Companies ◽  
The European Union ◽  
Case Scenario ◽  
Worst Case ◽  
Risk Scenarios ◽  
Copula Approach

Abstract The central idea of the paper is to present a general simple patchwork construction principle for multivariate copulas that create unfavourable VaR (i.e. Value at Risk) scenarios while maintaining given marginal distributions. This is of particular interest for the construction of Internal Models in the insurance industry under Solvency II in the European Union. Besides this, the Delegated Regulation by the European Commission requires all insurance companies under supervision to consider different risk scenarios in their risk management system for the company’s own risk assessment. Since it is unreasonable to assume that the potential worst case scenario will materialize in the company, we think that a modelling of various unfavourable scenarios as described in this paper is likewise appropriate. Our explicit copula approach can be considered as a special case of ordinal sums, which in two dimensions even leads to the technically worst VaR scenario.

Enterprise risk management and Solvency II: the system of governance and the Own Risk and Solvency Assessment

2020 ◽  
Vol 21 (4) ◽  
pp. 317-332 ◽  
Author(s):  
Pablo Durán Santomil ◽  
Luis Otero González
Keyword(s):  
Risk Management ◽  
Insurance Industry ◽  
Solvency Ii ◽  
Enterprise Risk Management ◽  
Insurance Companies ◽  
Legal Form ◽  
Content Type ◽  
Enterprise Risk ◽  
Solvency Assessment

Purpose The purpose of this paper is to analyze how enterprise risk management (ERM), the system of governance and the Own Risk and Solvency Assessment (ORSA) have been boosted with the entry of Solvency II. Design/methodology/approach For this analysis, the authors have undertaken a survey of chief risk officers (CROs) working in Spanish insurance companies. Findings The results show that Solvency II has definitely promoted ERM in the European insurance industry and improved the system of governance of the insurance companies, and that the perceived value of the ORSA for the companies is higher than the cost. It is clear that the quality of ERM implemented by companies is higher in those that face more complex risks and with greater interdependencies – that is, larger companies, foreign insurers and insurers with several lines of business – but is unaffected by the legal form of the entity (mutual/corporation). Originality/value This study conducts primary research with surveys of CROs and develops a measure of the quality of ERM implemented by insurance companies.

scholarly journals Metodología financiera de gestión y cuantificación de riesgos de las entidades aseguradoras

2013 ◽  
pp. 81
Author(s):  
Rafael Hernández Barros
Keyword(s):  
Value At Risk ◽  
Financial Risk ◽  
Stress Testing ◽  
Financial Models ◽  
Insurance Industry ◽  
Solvency Ii ◽  
Capital Requirements ◽  
Value Theory ◽  
Different Types ◽  
As Stress

El artículo describe las diferentes metodologías financieras de gestión integral de riesgos, detallando tanto aquellas utilizadas tradicionalmente en el sector asegurador para tarificar ycalcular las provisiones, y que ahora están siendo utilizadas para calcular la solvencia y los requerimientos de capital, como los modelos financieros más avanzados, tales como los modelosde “stress testing”, utilizados para analizar lo que podría ocurrir en determinados escenarios; la técnica de modelización del valor en riesgo (VaR), para calcular la pérdida máxima posible dentrode un periodo de tiempo y para un determinado nivel de probabilidad; la teoría del valor extremo, que se centra en el estudio de los extremos de la distribución de pérdidas y ganancias esperadas,tratando de estimar las pérdidas máximas que pueden producirse; y la aplicación de cópulas, para incorporar la dependencia entre diferentes tipos de riesgo. Supone también una aproximación aSolvencia II y a las nuevas exigencias de cuantificación del capital que trae consigo esta nueva legislación europea del sector asegurador.<br /><br />The article describes the different methodologies of financial risk management, featuring both those traditionally used in the insurance industry to estimate insurance, that they are now being used to calculate the solvency and capital requirements, as the more advances financial models as "stress testing", used to analyze what might happen in certain scenarios; the modeling technique of value at risk (VaR), to estimate the maximum possible loss within a period of time and for a certain level of probability; the extreme value theory, which focuses on the study of the ends of the expected losses and income distribution, trying to estimate the maximum losses that may occur; and the application of copulas to incorporate the dependence between different types of risk. It also implies an approach to Solvency II and to the new capital requirements for quantifying capital that brings this new insurance European legislation.

Venezuela: Political Confrontation and the World Community

2020 ◽  
Vol 12 (2) ◽  
pp. 71-111
Author(s):  
Z. W. Iwanowski ◽  
D. M. Rozental
Keyword(s):  
Latin American ◽  
Hot Spot ◽  
The United States ◽  
World Politics ◽  
The European Union ◽  
Case Scenario ◽  
Worst Case ◽  
Systemic Crisis ◽  
The Government ◽  
External Forces

The paper examines a complex web of domestic and external issues which have both provoked a systemic crisis in Venezuela and, at the same time, determined its specificity in comparison with the wave of protests sweeping across Latin America in 2019.The authors conclude that the escalation of the conflict in Venezuela was caused not only by the standoff between the legislative and the executive branches of the government, but also by the split of the whole society into proponents and opponents of ‘socialism of the 21st century’. The contradictions have led to the formation of the parallel branches of power: two presidents, two parliaments and two supreme courts (one of them in exile) which de facto coexist in the country and each claims exclusive rights and legitimacy.The authors also stress that the situation in Venezuela has obvious regional consequences. The miscalculations of the incumbent president were used in election campaigns in other Latin American countries and became one of the reasons for the defeat of left candidates, the subsequent ‘right drift’ leading to the isolation of the republic. The new political landscape has also affected the architecture of integration associations, which failed to develop a unified position toward the Bolivarian regime.Furthermore, in a current heightened state of international tensions Venezuela has turned into a theatre of international rivalry and conflict involving all the key subjects of world politics. The United States, China, Russia and the European Union compete for the energy resources of the country and pursue their own strategic interests. The inability or unwillingness of external forces to reach compromise and to bring the parties to the negotiating table can pose a threat to peace and international security.As a result, Venezuela has become one of the most turbulent countries in the region. At the same time, the repeated outbursts of protest waves are significantly different from popular uprisings in other Latin American states. In the worst-case scenario, a constantly worsening situation may result in a social explosion which threatens to make the Bolivarian Republic another hot spot of the planet.

scholarly journals Metodología financiera de gestión y cuantificación de riesgos de las entidades aseguradoras

2013 ◽  
pp. 81
Author(s):  
Rafael Hernández Barros
Keyword(s):  
Value At Risk ◽  
Financial Risk ◽  
Stress Testing ◽  
Financial Models ◽  
Insurance Industry ◽  
Solvency Ii ◽  
Capital Requirements ◽  
Value Theory ◽  
Different Types ◽  
As Stress

El artículo describe las diferentes metodologías financieras de gestión integral de riesgos, detallando tanto aquellas utilizadas tradicionalmente en el sector asegurador para tarificar ycalcular las provisiones, y que ahora están siendo utilizadas para calcular la solvencia y los requerimientos de capital, como los modelos financieros más avanzados, tales como los modelosde “stress testing”, utilizados para analizar lo que podría ocurrir en determinados escenarios; la técnica de modelización del valor en riesgo (VaR), para calcular la pérdida máxima posible dentrode un periodo de tiempo y para un determinado nivel de probabilidad; la teoría del valor extremo, que se centra en el estudio de los extremos de la distribución de pérdidas y ganancias esperadas,tratando de estimar las pérdidas máximas que pueden producirse; y la aplicación de cópulas, para incorporar la dependencia entre diferentes tipos de riesgo. Supone también una aproximación aSolvencia II y a las nuevas exigencias de cuantificación del capital que trae consigo esta nueva legislación europea del sector asegurador.<br /><br />The article describes the different methodologies of financial risk management, featuring both those traditionally used in the insurance industry to estimate insurance, that they are now being used to calculate the solvency and capital requirements, as the more advances financial models as "stress testing", used to analyze what might happen in certain scenarios; the modeling technique of value at risk (VaR), to estimate the maximum possible loss within a period of time and for a certain level of probability; the extreme value theory, which focuses on the study of the ends of the expected losses and income distribution, trying to estimate the maximum losses that may occur; and the application of copulas to incorporate the dependence between different types of risk. It also implies an approach to Solvency II and to the new capital requirements for quantifying capital that brings this new insurance European legislation.

scholarly journals Globalization on the Romanian insurance market in terms of competition

2018 ◽  
Vol 12 (1) ◽  
pp. 311-323
Author(s):  
Aurora Elena Dina
Keyword(s):  
Insurance Industry ◽  
Market Competition ◽  
Solvency Ii ◽  
Insurance Market ◽  
The European Union ◽  
High Concentration ◽  
Major Step ◽  
Insurance Sector ◽  
Competition Level ◽  
Legislative Framework

Abstract This article proposes an analysis of the globalization process impact on the Romanian insurance industry in the last decade, after accession of Romania to the European Union, in terms of competition. One of the main lines of change caused by globalization includes changes in the legislative framework, which are considered to be forced by globalization. The introduction of Solvency II directive to the beginning of 2016 year to ensure for all European insurers, the integration, globalization and the unitary functioning on the same insurance market and the recent measures taken by several Romanian insurance undertakings to strengthen their financial position could be consider a major step to further encourage the improvement of market competition and better policyholder protection. In the last ten years, the Romanian insurance sector has been faced with changes such as mergers & acquisitions and bankruptcies that have modified the local landscape of the industry, so the majority of active companies in the market are now owned by the biggest financial groups worldwide. The results of the research reveal that the Romanian insurance market is characterised by a high concentration and competition level and in spite of the present risks, it is still attractive for foreign investors.

Exploring Magnetic Properties as a Potential Pollution Proxy for Monitoring Levels and Bioaccessibility of Lead (Pb) in Playground Sand: a Preliminary Study  

2021 ◽  
Author(s):  
Anna Bourliva ◽  
Elina Aidona ◽  
Carla Patinha
Keyword(s):  
Magnetic Susceptibility ◽  
Magnetic Measurements ◽  
The European Union ◽  
Soil Dust ◽  
Case Scenario ◽  
Northern Greece ◽  
Development Education ◽  
Worst Case ◽  
Magnetic Phases ◽  
Social Fund

&lt;p&gt;The need to control soil/dust quality in recreation sites of urban agglomerations, especially in those where children are exposed, has been extensively highlighted. Particularly, in children&amp;#8217;s play sites it is imperative to quantify the levels of potential harmful elements (PHEs) in soils and dusts. Particularly, lead (Pb) is an element of concern since exposure of children to Pb and the consequently elevated blood Pb levels are linked to severe behavioral disorders and reductions of intellectual function. On the other hand, the use of magnetic methods is proposed as a quick and inexpensive first step in assessing soil/dust pollution by providing qualitative data on its degree and extent. The aim of the present study was to perform magnetic measurements in order to find a relationship between levels and bioaccessibility of Pb in playground sands and sand-bound iron-bearing magnetic phases. For this reason, composite sand samples were collected within the top layer at 37 public playgrounds in the broader area of the city of Thessaloniki, Northern Greece. Sampling conducted from 2-5 spots of the playground not covered by the treetops, nor at the edge of the playground or near to vegetation or urban furniture. The mass specific magnetic susceptibility (&amp;#967;&lt;sub&gt;lf&lt;/sub&gt;) of the playground sands exhibited a range of 51-248.7 x 10&lt;sup&gt;-8&lt;/sup&gt; m&lt;sup&gt;3&lt;/sup&gt; kg&lt;sup&gt;-1&lt;/sup&gt; with a median of 149.8 x10&lt;sup&gt;-8&lt;/sup&gt; m&lt;sup&gt;3&lt;/sup&gt; kg&lt;sup&gt;-1&lt;/sup&gt; indicating a notable amount of sand-bound Fe-bearing magnetic phases. The frequency dependent magnetic susceptibility (&amp;#967;&lt;sub&gt;fd&lt;/sub&gt;) varied among 0.11 to 7.73% with only limited sand samples exhibiting values &gt;5%, suggesting the lack of super paramagnetic magnetite grains within the majority of the studied samples. The total Pb concentrations in playground sands ranged from 18.6 to 46.7 mg kg&lt;sup&gt;-1&lt;/sup&gt; with a median of&amp;#160; 28.7 mg kg&lt;sup&gt;-1 &lt;/sup&gt;and lies within the ranges reported by other researchers. Despite the insignificant differences observed on Pb contents among a sub-set of 12 sands with elevated &amp;#967;&lt;sub&gt;lf&lt;/sub&gt; values (mean Pb 31.3 mg kg&lt;sup&gt;-1&lt;/sup&gt; , &amp;#967;&lt;sub&gt;lf&lt;/sub&gt; &gt; 175 x 10&lt;sup&gt;-8&lt;/sup&gt; m&lt;sup&gt;3&lt;/sup&gt; kg&lt;sup&gt;-1&lt;/sup&gt; ) and the rest of the samples (mean Pb 29.7 mg kg&lt;sup&gt;-1&lt;/sup&gt;), a moderate correlation coefficient (r=0.685, p&lt;0.05) was recorded between &amp;#967;&lt;sub&gt;lf&lt;/sub&gt; and Pb in the enhanced magnetized sub-set underscoring a probable linkage with the ferrimagnetic particles of playground sand. Bioaccessible Pb concentrations (gastric phase) ranged from 5.73 to 20.7 mg kg&lt;sup&gt;-1&lt;/sup&gt; with 22-44% of Pb being in &amp;#160;bioaccessible form in the playground sands. Different lead intake scenarios (based on bioaccessible Pb) underscored no health risk for children through sand ingestion with the exception of a worst case scenario of pica behaviour (intake 20g/d).&lt;/p&gt;&lt;p&gt;&lt;strong&gt;Acknowledgements:&lt;/strong&gt; This research is co-financed by Greece and the European Union (European Social Fund- ESF) through the Operational Programme &amp;#171;Human Resources Development, Education and Lifelong Learning&amp;#187; in the context of the project &amp;#8220;Reinforcement of Postdoctoral Researchers - 2&lt;sup&gt;nd&lt;/sup&gt; Cycle&amp;#8221; (MIS-5033021), implemented by the State Scholarships Foundation (&amp;#921;&amp;#922;&amp;#933;).&lt;/p&gt;

scholarly journals Financial management of insurance companies in the context of the new regime Solvency II

2017 ◽  
Vol 11 (1) ◽  
pp. 625-636 ◽  
Author(s):  
Costin Istrate ◽  
Dumitru Badea
Keyword(s):  
Financial Management ◽  
Solvency Ii ◽  
Capital Requirements ◽  
Insurance Companies ◽  
The European Union ◽  
Additional Information ◽  
European Area ◽  
Challenges And Opportunities ◽  
Insurance Rates ◽  
European Insurance

Abstract The new solvency regime Solvency II represents a solid and harmonized prudential framework applicable by insurance companies in the European area. Solvency II was implemented in the European Union by adopting Directives 2009/138/EC respectively 2014/51/EU, replacing existing directives regulating solvency former regime, known as Solvency I. Thus, the new European legislation in insurance, applicable from 1 January 2016, was aimed at unifying the main European insurance market and ensuring consumer protection. The responsible authority at EU level with the implementation of the new solvency regime is EIOPA - European Insurance and Occupational Pensions Authority, which dealt in previous periods of testing the European market insurance through organizing quantitative impact studies (last exercise - QIS5, organized in 2011). The main standards derived from Solvency II and also the new IFRS accounting provisions, intended to increase the transparency of risk management and investment, in order to pricing insurance products and profitability of the different classes of insurance rates. Solvency II brings both challenges and opportunities for companies, changing the concept of building protection programs for insured and generating additional concerns about capital requirements in the determination of own funds (basic, auxiliary and surplus) that can be used to meet this requirement. Also estimate realistic and prudent risk assumed by insurance contracts concluded transposed to the insurance companies by recording every technical reserves represent a very important element in order to establish an optimal balance of financial resources. Given the significant overlap between IFRS and Solvency II, insurers will have to improve disclosure requirements of additional information and adjust planning and forecasting. All these measures will increase the efficiency of financial management, a series of operational measures and by providing documented and tested processes. Also, increasing volatility related to financial results will cause insurance companies to deliver predictable results, a process that will produce changes in the financial management optics.

scholarly journals A simulation of the insurance industry: the problem of risk model homogeneity

2021 ◽  
Author(s):  
Torsten Heinrich ◽  
Juan Sabuco ◽  
J. Doyne Farmer
Keyword(s):  
Risk Model ◽  
Insurance Industry ◽  
Solvency Ii ◽  
Insurance Companies ◽  
Risk Models ◽  
Catastrophe Insurance ◽  
Balance Sheets ◽  
Cat Bonds ◽  
European Regulatory ◽  
Heavy Tailed

AbstractWe develop an agent-based simulation of the catastrophe insurance and reinsurance industry and use it to study the problem of risk model homogeneity. The model simulates the balance sheets of insurance firms, who collect premiums from clients in return for insuring them against intermittent, heavy-tailed risks. Firms manage their capital and pay dividends to their investors and use either reinsurance contracts or cat bonds to hedge their tail risk. The model generates plausible time series of profits and losses and recovers stylized facts, such as the insurance cycle and the emergence of asymmetric firm size distributions. We use the model to investigate the problem of risk model homogeneity. Under the European regulatory framework Solvency II, insurance companies are required to use only certified risk models. This has led to a situation in which only a few firms provide risk models, creating a systemic fragility to the errors in these models. We demonstrate that using too few models increases the risk of nonpayment and default while lowering profits for the industry as a whole. The presence of the reinsurance industry ameliorates the problem but does not remove it. Our results suggest that it would be valuable for regulators to incentivize model diversity. The framework we develop here provides a first step toward a simulation model of the insurance industry, which could be used to test policies and strategies for capital management.

scholarly journals France

2019 ◽  
Vol 19 (323) ◽  
Author(s):  
Keyword(s):  
Interest Rates ◽  
Insurance Industry ◽  
Solvency Ii ◽  
Capital Requirements ◽  
The European Union ◽  
French Economy ◽  
Low Interest Rates ◽  
Challenging Environment ◽  
High Level

The French insurance industry is the largest in the EU27 and therefore the largest in the European Union after Brexit. The French insurance market is large both because the French economy is the second largest in the EU27 and because insurance is a significant part of the French economy. France has a very high level of insurance penetration, particularly for life insurance. There are 742 insurers in the insurance industry. This large number of insurers creates a diverse and competitive market. There are 339 insurers subject to Solvency II with less than EUR 1 billion in assets. It appears these small insurers are well capitalized with all exceeding a 100 percent SCR even if the transitional measures in Solvency II and the long-term guarantee package are not taken into account. Given the diversification benefits embedded in Solvency II capital requirements and the challenging environment of prolonged low interest rates, the presence of many independent small entities will have an impact on the overall efficiency and cost of delivering products to policyholders in the market.

scholarly journals Evaluation of the harmonization process of the Czech insurance market with the single insurance market of the EU

2004 ◽  
Vol 52 (6) ◽  
pp. 239-252 ◽  
Author(s):  
Viktória Čejková ◽  
Eva Vávrová
Keyword(s):  
Life Insurance ◽  
Insurance Industry ◽  
Insurance Market ◽  
Insurance Companies ◽  
Business Sector ◽  
The European Union ◽  
The Czech Republic ◽  
Harmonization Process ◽  
Global Indicators ◽  
The Eu

For the Czech insurance industry, it has been 13 years since the passage of the Insurance Act in 1991, which did away with the monopoly and allowed competition in this business sector. In our evaluation, we can state that the positives outweigh the negatives. A relatively high pace of growth in total premiums written was achieved and the ratio of premiums written to GDP increased, up to 4,0% in 2002. In comparison with EU countries, the Czech insurance market is behind in 2 global indicators: the ratio of premiums written to GDP and the share of life insurance in total premiums written. The Czech insurance market must count on greater competition from foreign insurance companies, as the Czech Republic was May 1, 2004, accepted as a member of the European Union.

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