Risk margin for a non-life insurance run-off

Wüthrich Mario V., Embrechts Paul and Tsanakas Andreas
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Wüthrich Mario V.: ETH Zürich, Department of Mathematics, Zürich, Schweiz
Embrechts Paul: ETH Zürich, Department of Mathematics, Zürich, Schweiz
Tsanakas Andreas: City University, Cass Business School, London EC1Y 8TZ, Großbritannien

Statistics & Risk Modeling, 2011, vol. 28, issue 4, 299-317

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.

Keywords: claims reserving; best-estimate reserves; run-off risks; risk margin; market value margin (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (4)

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DOI: 10.1524/strm.2011.1096

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