Risk margin for a non-life insurance run-off

Wuethrich, M. V., Embrechts, P. & Tsanakas, A. (2011). Risk margin for a non-life insurance run-off. Statistics & Risk Modeling, 28(4), pp. 299-317. doi: 10.1524/strm.2011.1096

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Abstract

For solvency purposes insurance companies need to calculate so-called best-estimate reserves for outstanding loss liability cash flows and a corresponding risk margin for non-hedgeable insurance-technical risks in these cash flows. In actuarial practice, the calculation of the risk margin is often not based on a sound model but various simplified methods are used. In the present paper we properly define these notions and we introduce insurance-technical probability distortions. We describe how the latter can be used to calculate a risk margin for non-life insurance run-off liabilities in a mathematically consistent way.

Item Type: Article
Additional Information: Published by De Gruyter 2011.
Uncontrolled Keywords: Claims reserving, best-estimate reserves, run-off risks, risk margin, market value margin, one-year uncertainty, claims development result, market-consistent valuation
Subjects: H Social Sciences > HF Commerce
Divisions: Cass Business School > Faculty of Actuarial Science & Insurance
URI: http://openaccess.city.ac.uk/id/eprint/5987

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