Next Article in Journal
A General Framework for Portfolio Theory. Part II: Drawdown Risk Measures
Previous Article in Journal
Systemic Risk and Insurance Regulation
Article Menu
Issue 3 (September) cover image

Export Article

Open AccessArticle
Risks 2018, 6(3), 75; https://doi.org/10.3390/risks6030075

One-Year Change Methodologies for Fixed-Sum Insurance Contracts

1
Prime Re Solutions, 6340 Zug, Switzerland
2
Department of Mathematics, UAM, Campus de Cantoblanco, 28049 Madrid, Spain
3
SCOR, General Guisan-Quai 26, 8022 Zurich, Switzerland
4
LPSM, Université Paris Diderot, 75013 Paris, France
*
Author to whom correspondence should be addressed.
Received: 27 June 2018 / Revised: 24 July 2018 / Accepted: 26 July 2018 / Published: 30 July 2018
Full-Text   |   PDF [1053 KB, uploaded 1 August 2018]   |  

Abstract

We study the dynamics of the one-year change in P&C insurance reserves estimation by analyzing the process that leads to the ultimate risk in the case of “fixed-sum” insurance contracts. The random variable ultimately is supposed to follow a binomial distribution. We compute explicitly various quantities of interest, in particular the Solvency Capital Requirement for one year change and the Risk Margin, using the characteristics of the underlying model. We then compare them with the same figures calculated with existing risk estimation methods. In particular, our study shows that standard methods (Merz–Wüthrich) can lead to materially incorrect results if the assumptions are not fulfilled. This is due to a multiplicative error assumption behind the standard methods, whereas our example has an additive error propagation as often happens in practice. View Full-Text
Keywords: one-year risk; Merz–Wüthrich; solvency II; solvency capital requirement; risk margin; fixed-sum insurance one-year risk; Merz–Wüthrich; solvency II; solvency capital requirement; risk margin; fixed-sum insurance
Figures

Figure 1

This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).
SciFeed

Share & Cite This Article

MDPI and ACS Style

Dacorogna, M.; Ferriero, A.; Krief, D. One-Year Change Methodologies for Fixed-Sum Insurance Contracts. Risks 2018, 6, 75.

Show more citation formats Show less citations formats

Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Related Articles

Article Metrics

Article Access Statistics

1

Comments

[Return to top]
Risks EISSN 2227-9091 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert
Back to Top