Chapter 28: Improved Insurer’s Capital Adequacy of Reserve Risk Using Copula Approach and Hypothesis Tests
Putting aside adequate amount of capital and absorbing losses even during recession times are important for financial stability management and for shareholders. There are non-linear dependence and heavily skewed loss distributions in insurance.
Copula as risk-aggregation measure is not yet widely used in the insurance sector.
Therefore, we are going to study how to choose the most appropriate type of copula for non-life reserve risk, calculate adequate capital by applying value-at-risk at 99.5% which
is mandatory in EU market, and select the copula and hypothesis tests to choose the most appropriate copula type for reserve risk. A case study based on actual data will be discussed.
VaR, copula approach, insurance economic modelling, internal capital modelling, hypothesis tests, selected copula tests, stability management.
Zariņa-Cīrule, I., Voronova, I., Pettere, G. Chapter 28: Improved Insurer’s Capital Adequacy of Reserve Risk Using Copula Approach and Hypothesis Tests. No: Quantitative Methods in Demography: Methods and Related Applications in the Covid-19 Era. Vol.52. Cham: Springer Nature Switzerland AG, 2022. 423.-432.lpp. ISSN 1389-6784. e-ISSN 2215-1990. Pieejams: doi:10.1007/978-3-030-93005-9_28