Scenario Analysis Approach for Operational Risk in Insurance Companies

Michal Vyskočil ()
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Michal Vyskočil: University of Economics, Prague

A chapter in Digitalization in Finance and Accounting, 2021, pp 147-155 from Springer

Abstract: Abstract This chapter deals with the possibility of calculating the required capital in insurance companies allocated to operational risk under Solvency II regulation and compares the possible statistical distributions for the frequency and the severity followed by an aggregate distribution. For the calculation, was used only the illustrative dataset to see the effect of the three main parameters (typical impact, worst case impact, and frequency) which are needed for building the model for calculation 99.5% VaR by using Monte Carlo simulation. This chapter discusses parameter sensitivity and/or ratio sensitivity on calculating capital. From analysis came up the first conclusion that the impact of frequency is much higher in the interval (0;1) than above the interval to calculated capital. The second conclusion is the Worst case and Typical Case ratio, where we saw that if the ratio is around 150 or higher, the calculated capital increased faster.

Keywords: Operational risk; Insurance; Scenario analysis; Distribution (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-030-55277-0_13

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DOI: 10.1007/978-3-030-55277-0_13

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