Solvency capital requirement for a temporal dependent losses in insurance
Christian de Peretti and
Economic Modelling, 2016, vol. 58, issue C, pages 588-598
This article addresses the appropriate modeling of losses for the insurance sector. In fact, solvency 2 framework has suggested some formulas to evaluate losses and solvency capital using an internal approach. However, these formulas where derived under the assumption of independent losses. Thus, the amount of capital may be inaccurate when losses are dependent, which is the case in practice. The aim of this paper is to investigate temporal dependence structure among claim amounts (losses). For that, a novel model named autoregressive conditional amount (ACA) model handling the dynamic behavior of claim amounts in insurance companies is proposed. Results show that ACA models allow to predict accurately the future claims. Moreover, a measure of risk namely value at risk (VaR) ACA that could hedge daily dependent losses is provided. By backtesting techniques, empirical results show that the new VaR ACA can efficiently evaluate the coverage amount of risks.
Keywords: Claim amounts; Temporal dependence; Generalized extreme value model; Value at risk; Backtesting (search for similar items in EconPapers)
JEL-codes: C22 C23 C52 C58 G22 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:eee:ecmode:v:58:y:2016:i:c:p:588-598
Access Statistics for this article
Economic Modelling is currently edited by S. Hall and P. Pauly
More articles in Economic Modelling from Elsevier
Series data maintained by Dana Niculescu ().