FUNDAMENTAL DEFINITION OF THE SOLVENCY CAPITAL REQUIREMENT IN SOLVENCY II

Marcus C. Christiansen and Andreas Niemeyer

ASTIN Bulletin, 2014, vol. 44, issue 3, 501-533

Abstract: It is essential for insurance regulation to have a clear picture of the risk measures that are used. We compare different mathematical interpretations of the Solvency Capital Requirement (SCR) definition from Solvency II that can be found in the literature. We introduce a mathematical modeling framework that enables us to make a mathematically rigorous comparison. The paper shows similarities, differences, and properties such as convergence of the different SCR interpretations. Moreover, we generalize the SCR definition to future points in time based on a generalization of the value at risk. This allows for a sound definition of the Risk Margin. Our study helps to make the Solvency II insurance regulation more consistent.

Date: 2014
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