Taking into account the pandemic risk in a partial internal model

Marine Habart Corlosquet
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Marine Habart Corlosquet: LUSSI - Département Logique des Usages, Sciences sociales et Sciences de l'Information - UEB - Université européenne de Bretagne - European University of Brittany - Télécom Bretagne - IMT - Institut Mines-Télécom [Paris], Lab-STICC_TB_CID_DECIDE - Lab-STICC - Laboratoire des sciences et techniques de l'information, de la communication et de la connaissance - UEB - Université européenne de Bretagne - European University of Brittany - ENIB - École Nationale d'Ingénieurs de Brest - UBS - Université de Bretagne Sud - UBO - Université de Brest - Télécom Bretagne - IBNM - Institut Brestois du Numérique et des Mathématiques - UBO - Université de Brest - ENSTA Bretagne - École Nationale Supérieure de Techniques Avancées Bretagne - IMT - Institut Mines-Télécom [Paris] - CNRS - Centre National de la Recherche Scientifique

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Abstract: Since the influenza A (H1N1) virus has made headlines of newspapers in 2009, awareness of the importance of pandemic risk has risen, especially among insurers. In fact, the occurrence of a severe pandemic could cause a significant increase in mortality, and consequently might cause the bankruptcy of insurance companies. Thus, it is essential for insurers to better understand pandemic risk. This is entirely consistent with the requirements of the new European Directive Solvency 2, which encourages insurers to control all the risks they face and to hold sufficient capital for these risks. This capital can be calculated by a standard formula, an internal model or a partial internal model. The purpose of this paper is to propose a way of integrating the risk of pandemic influenza in a partial internal model for the death guarantee and protection business. To do so, mortality risk is split into a trend and a pandemic shock event. The model takes into account the nature of available data and of the level of segmentation chosen by the insurance company (individual or aggregate data).

Keywords: Protection Business; Prospective mortality tables; Mortality models; Solvency II; Internal Model; Epidemiological Models; Pandemic Risk (search for similar items in EconPapers)
Date: 2010-07
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Published in Bulletin français d'actuariat, 2010, 10 (20), pp.101 - 138

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