TY  - UNPD
A1  - Grochola, Nicolaus
A1  - Schlütter, Sebastian
T1  - Discretionary decisions in capital requirements under Solvency II
N2  - European insurers are allowed to make discretionary decisions in the calculation of Solvency II capital requirements. These choices include the design of risk models (ranging from a standard formula to a full internal model) and the use of long-term guarantees measures. This article examines the impact and the drivers of discretionary decisions with respect to capital requirements for market risks. In a first step of our analysis, we assess the risk profiles of 49 stock insurers using daily market data. In a second step, we exploit hand-collected Solvency II data for the years 2016 to 2020. We find that long-term guarantees measures substantially influence the reported solvency ratios. The measures are chosen particularly by less solvent insurers and firms with high interest rate and credit spread sensitivities. Internal models are used more frequently by large insurers and especially for risks for which the firms have already found adequate immunization strategies.
T3  - ICIR Working Paper Series - No. 50 [July 2023] 
KW  - Solvency II
KW  - capital requirements
KW  - discretionary decisions
Y1  - 2023
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/77287
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-772879
UR  - https://www.icir.de/fileadmin/user_upload/editors/documents/working_papers/wp_50_grochola_schluetter_06_2023.pdf
PB  - International Center for Insurance Regulation
CY  - Frankfurt am Main
ER  -