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Robust evaluation of SCR for participating life insurances under Solvency II

Donatien Hainaut, Pierre Devolder and Antoon Pelsser ()

Insurance: Mathematics and Economics, 2018, vol. 79, issue C, 107-123

Abstract: This article proposes a robust framework to evaluate the solvency capital requirement (SCR) of a participating life insurance with death benefits. The preference for robustness arises from the ambiguity caused by the market incompleteness, model shortcomings and parameters misspecifications. To incorporate the uncertainty in the procedure of evaluation, we consider a set of potential equivalent pricing measures in the neighborhood of the real one. In this framework, closed form expressions for the net asset value (NAV) and for its moments are found. The SCR is next approximated by the Value at Risk of Gaussian or normal inverse Gaussian (NIG) random variables, approaching the NAV distribution and fitted by moments matching.

Keywords: Solvency II; Robustness; ORSA; Life insurance; Capital requirement (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:insuma:v:79:y:2018:i:c:p:107-123