Efficient Capital Management with Internal Model: Case of Non-Life Insurance
Proceedings of the Estonian Academy of Sciences 2022
Ilze Zariņa-Cīrule, Gaida Petere, Irina Voronova

The main goal of insurance company management is to increase shareholders’ value and implement a strategy that promotes the sustainable growth of a company. Well-known possible measures for insurers are as follows: share price, economic value, market capitalisation, gross premiums earned and solvency ratio. These measures include efficient capital management and its costs which could be a major cost position depending on risk appetite and the extent of capital needed to support it. The research focuses on non-life insurers for reserve risk modelling. The aim of the study is to develop an alternative capital requirement model and its application to perform better quantification of non-life underwriting risk. In the current study, a more accurate risk quantification model has been developed than a standard model provided by the EU regulator under the Solvency II framework. The proposed model provides capital cost gains as well. A case study based on non-life real data sets with underwriting in the Baltic countries is discussed with inclusion of pandemic trends that had impact on economies and customer behaviors. The study considers different non-life reserve distributions for each insurance business line, risk aggregation and the way of choosing the most appropriate type of copula model for non-life reserve risk. Adequate capital is calculated by applying value at risk at 99.5%, which is mandatory in the EU market and study considers which hypothesis, selected tests have to be chosen in order to choose the most appropriate copula model for reserve risk.


Atslēgas vārdi
capital management, copula, financial stability, internal model, non-life insurance, stochastic reserving, value at risk
DOI
10.3176/proc.2022.3.08
Hipersaite
https://kirj.ee/wp-content/plugins/kirj/pub/proc-3-2022-289-306_20220824233311.pdf?v=a7bdee32cb21

Zariņa-Cīrule, I., Pettere, G., Voronova, I. Efficient Capital Management with Internal Model: Case of Non-Life Insurance. Proceedings of the Estonian Academy of Sciences, 2022, Vol. 71, No. 3, 289.-306.lpp. ISSN 1736-6046. e-ISSN 1736-7530. Pieejams: doi:10.3176/proc.2022.3.08

Publikācijas valoda
English (en)
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