The one-year non-life insurance risk

Esbjörn Ohlsson and Jan Lauzeningks

Insurance: Mathematics and Economics, 2009, vol. 45, issue 2, 203-208

Abstract: A major part of the literature on non-life insurance reserve risk has been devoted to the ultimo risk, the risk in the full run-off of the liabilities. This is in contrast to the short time horizon in internal risk models at insurance companies, and the one-year risk perspective taken in the Solvency II project of the European Community. This paper aims at clarifying the one-year risk concept and describing simulation approaches, in particular for the one-year reserve risk. We also discuss the one-year premium risk and its relation to the premium reserve. Finally, we initiate a discussion on the role of risk margins and discounting for the reserve and premium risk, with focus on the Cost-of-Capital method. We show that risk margins do not affect the reserve risk and show how reserve duration can be used for easy calculation of risk margins. 1

Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:45:y:2009:i:2:p:203-208

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