 INTERNAL MODEL FOR MEASURING PREMIUM RISK IN DETERMINING SOLVENCY OF NON-LIFE INSURERSJelena Kočović and Marija Koprivica Economic Annals, 2018, vol. 63, issue 217, 99 - 128 Abstract: Under contemporary dynamic approaches the solvency of insurance companies is determined by measuring the risks that threaten their business. This paper presents an internal model for measuring premium risk when evaluating the solvency of non-life insurers. The solvency capital requirement is calculated on the basis of a compound distribution of insurance portfolio aggregate claim amount, resulting from combining separately modelled claim frequency and severity distributions, with prior verification of earned technical premium sufficiency. The practical application of the model is illustrated by a case study of a specific non-life insurance company in Serbia. The research findings show that the dynamic model of premium risk measurement results in larger capital requirement and contributes to a more reliable assessment of insurers’ solvency than the static model. This proves the inadequacy of the existing fixed ratio model and stresses the need for changes in the current methodology of determining the solvency of insurance companies in Serbia. Keywords: non-life insurance; premium risk; solvency margin; internal model; Solvency II (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:beo:journl:v:63:y:2018:i:217:p:99-128 Ordering information: This journal article can be ordered from Access Statistics for this article Economic Annals is currently edited by Will Bartlett More articles in Economic Annals from Faculty of Economics and Business, University of Belgrade Contact information at EDIRC. |
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