A stochastic forward-looking model to assess the profitability and solvency of european insurers

In this paper, we develop an analytical framework for conducting forward-looking assessments of profitability and solvency of the main euro area insurance sectors. We model the balance sheet of an insurance company encom
In this paper, we develop an analytical framework for conducting forward-looking assessments of profitability and solvency of the main euro area insurance sectors. We model the balance sheet of an insurance company encompassing both life and non-life business and we calibrate it using country level data to make it representative of the major euro area insurance markets. Then, we project this representative balance sheet forward under stochastic capital markets, stochastic mortality developments and stochastic claims. The model highlights the potential threats to insurers solvency and profitability stemming from a sustained period of low interest rates particularly in those markets which are largely exposed to reinvestment risks due to the relatively high guarantees and generous profit participation schemes. The model also proves how the resilience of insurers to adverse financial developments heavily depends on the diversification of their business mix. Finally, the model identifies potential negative spillovers between life and non-life business thorugh the redistribution of capital within groups.
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Metadaten
Author:Elia Berdin, Cosimo Pancaro, Christoffer Kok
URN:urn:nbn:de:hebis:30:3-402035
URL:http://ssrn.com/abstract=2782333
Parent Title (English):SAFE working paper series ; No. 137
Series (Serial Number):SAFE working paper series (137)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Date of Publication (online):2016/05/01
Date of first Publication:2016/05/01
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2016/05/24
Tag:Financial Stability; Insurance; Interest Rate Risk; Stress Test
Edition:May 2016
Pagenumber:77
HeBIS PPN:381320294
Institutes:Wirtschaftswissenschaften
House of Finance (HoF)
Center for Financial Studies (CFS)
Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:G20 General
G22 Insurance; Insurance Companies
G23 Pension Funds; Other Private Financial Institutions
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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