On the Estimation of the Undertaking-Specific Parameters and the Related Hypothesis Testing

Massimo de Felice and Franco Moriconi

No 0025/2016, Working papers of the Department of Economics - University of Perugia (IT) from Università di Perugia, Dipartimento Economia

Abstract: his working paper illustrates the calculation process for estimating the undertaking-speci c parameters (USP) as de ned in Sol- vency II, taking into account the underlying theoretical basis. The USPs considered here are the unit standard deviation for the premium risk and reserve risk submodules of non-life insurance; the analysis does not take into account the entity-speci c adjustment factors for non-proportional reinsur- ance. For each calculation method of the unit standard deviation we present the formal settings proposed by European Commission; the theoretical prin- ciples are recalled, the appropriate methods for hypothesis testing and for assessing the \goodness-of- t" to data are described, data necessary for cal- culation is speci ed and the relevant computational issues are discussed. This working paper has practical motivations; it coordinates \useful doc- umentation" on methodologies, criteria, algorithms, types of analysis for the \determination of the speci c parameters" (as required by IVASS in [15] point (g)). In order to facilitate immediate application, we occasionally re- call notions deemed as standard in best practice, for instance on hypothesis testing.

Pages: 45 pages
Date: 2016-10-24
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