Risk aggregation in Solvency II through recursive log-normals

Bølviken, Erik; Guillén, Montserrat

doi:10.1016/j.insmatheco.2016.12.006

Cited by 16 publications

(13 citation statements)

References 21 publications

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“…After having explained the section dedicated to the actuarial part [73], it is necessary to explain the multidisciplinary connection. In fact, the latter is fundamental for innovative technological implementations [74] and shall pay attention to a new possible contractual implementation in the insurance field [75].…”

Section: Resultsmentioning

confidence: 99%

Implementation of Blockchain Technology in Insurance Contracts Against Natural Hazards: A Methodological Multi-Disciplinary Approach

Pagano

Romagnoli

Vannucci

2019

Environmental and Climate Technologies

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Risk insurance for disasters plays a relevant part in the implementation of risk reduction strategies during the pre-disaster phase. This is essential to support risk management towards decreasing the marginal risk allowing policy holders to transfer risk to avoid considerable financial loads from the costs incurred during the recovery phase in a post-disaster phase. There is evidence that the introduction of an integrated risk insurance strategy for community resilience planning is still lacking. Thus, this undermines the possibility to have proper optimized holistic risk management; on the one hand this strengthens pre-disaster risk mitigation measures, mostly relying on mitigative infrastructural solutions, and on the other hand it better defines risk prevention strategies mostly connected to land planning and urban development. This paper will show how insurance markets can play a key role towards mitigating the economic consequences of natural and climate change disasters, and how essential it is to better quantify the beneficial effects and costs of engineer-based mitigative solutions. In this context, the legal framework into which the actuarial quantitative model can be implemented will support the creation of an integrated multidisciplinary approach with potential implementation on a novel platform capable of collecting and processing information from different sources and dimensions such as blockchain technology. The scientific community is, in fact, increasingly interested in implementing blockchain technology to overcome problems linked to the contractual dimension of natural disaster risk insurance which can be interpreted as a sort of smart contracting. Through a study that involved four distinct areas, namely: law, environmental engineering, insurance and IT, this paper proposes a specific multidisciplinary methodology to achieve the drafting and implementation of a digital insurance contract on a blockchain platform against natural hazards. This paper proposes the basis to advance a quantitative concept to optimize the impact of catastrophe risk insurance onto the community resilience; in fact providing a key synergy for definition of pre-disaster conditions.

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Section: Resultsmentioning

confidence: 99%

Implementation of Blockchain Technology in Insurance Contracts Against Natural Hazards: A Methodological Multi-Disciplinary Approach

Pagano

Romagnoli

Vannucci

2019

Environmental and Climate Technologies

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“…In insurance matters, except for the Italian Insurance Supervisory Institute (IVASS) decisions and EU Directives, the information obligation on the truthfulness of the data inherent to the risk and insuring asset is generally recognized exclusively as a burden of the insured party. The insurance contract originates from the truthful information that the insured party is charged to communicate to the insurance company [6].…”

Section: General Framework On Contractual Insurance Regulations In Thmentioning

confidence: 99%

“…Articles 1892 and 1893 of the civil code of Italy (c.c.) describe in a clear and precise way the statements Environmental and Climate Technologies ____________________________________________________________________________ 2020 / 24 376 that must be complied to by the insured, delimiting the consequences for a possible breach of contract (non-fulfilment) [6]. These regulations provide that the insured is obliged to report to the insurer any relevant situation on the risk: if the subject is not intentionally culpably or intentionally grossly negligent the contract is voidable, while in presence of slight negligence the contract is valid and effective, but the insurer is granted a unilateral right of withdrawal.…”

Section: General Framework On Contractual Insurance Regulations In Thmentioning

confidence: 99%

Insurance against Natural Hazards: Critical Elements on the Risk Premium Evaluation in the Italian Context

Pagano

Romagnoli

Vannucci

2020

Environmental and Climate Technologies

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The aim of this paper is to highlight the insurance dynamics in relation to catastrophic events and how the insurance companies approach the insured parties (contractors) for the definition of a tailored insurance policy contract. Within this study the emphasis has been addressed more on the regulatory situation in the Italian context as a key example of the existing contractual problems regarding the drafting of insurance contracts against natural hazards. In particular, the study defines the drawbacks of having information asymmetry between the parties towards several substantial elements of the policy agreement, including the definition of the overall risk, exposure, vulnerability and the consequential insurance premium. This study provides an overview of the possible calculation as a specific one based on the risk / premium assessment tool of the Exceedance Probability curve (EP curve) method used by insurance companies. This method focuses on some of the most important insurance parameters for determining the insurance premium and the possible indemnity in relation to the risk related to natural hazards. In the results and discussion, the research reports on how an information discrepancy on contractual transparency appears evident in fact creating an obstacle to facilitate the access to the data referred to in the risk calculation inherent in the asset and obviating the information discrepancy, allowing the private individual to use the information consciously. With the presentation of a risk calculation tool based on the EP curve and relative loss or exceedance, the study shows a possible correlation between insurance dynamics and the new environmental, social, governance (ESG) parameters for implementation on the financial markets.

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“…A procedure for picking the tree structure is advanced using hierarchical clustering techniques, along with a distance metric based on Kendall's tau. The approach is illustrated using data Finally, Bølviken and Guillen (2017) suggest a simple scheme based on the log-normal distribution, which is proved to be superior to the standard formula and to adjustments of the Cornish-Fisher type for risk aggregation in Solvency 2. Relying on the Monte Carlo simulation, this approach considers the tail-dependence by mixing hierarchical Clayton copulas in order to approve the accuracy of the lognormal approximation and to illustrate the importance of encompassing tail dependence.…”

Section: Literary Reviewmentioning

confidence: 99%

A Multivariate Analysis for Risk Capital Estimation in Insurance Industry: Vine Copulas

Mejdoub¹,

Arab²

2017

Asian Development Policy Review

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Article HistoryThis paper deals with the risks aggregation issue and adequate risk capital modeling within a multivariate setting. Focusing on the non-life insurance risk module, we examine the sensitivity of capital requirement to the dependence among risks for a multi-line Tunisian insurance firm. Such a context entails a nonlinear dependence of risks problem whose resolution may be intended by means of multivariate copulas. The relevant analysis relies profoundly on the dependence modeling by the means of vine copulas which are a flexible technique to model multivariate distributions constructed using a cascade of bivariate copulas. Under various confidence levels in VaR and TailVaR, the reached findings reveal the advantages of D-Vine copula in modeling inhomogeneous structures of dependency due to its flexibility of use in a simulation context. Practitioners and regulators can explore our conclusions for the assessment of risk capital under Solvency 2, which is based on stochastic models.Contribution/ Originality: This study uses new methodology based on CD-vine copulas estimation to investigate the sensitivity of solvency capital requirement to the dependence pattern between the losses derived from non-life business lines of a Tunisian insurance company.

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Risk aggregation in Solvency II through recursive log-normals

Cited by 16 publications

References 21 publications

Implementation of Blockchain Technology in Insurance Contracts Against Natural Hazards: A Methodological Multi-Disciplinary Approach

Implementation of Blockchain Technology in Insurance Contracts Against Natural Hazards: A Methodological Multi-Disciplinary Approach

Insurance against Natural Hazards: Critical Elements on the Risk Premium Evaluation in the Italian Context

A Multivariate Analysis for Risk Capital Estimation in Insurance Industry: Vine Copulas

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