Some criticism to a general model in Solvency II: an explanation from a clustering point of view

Abstract

It is a well-known fact that heterogeneity is one of the characteristics of the insurance market, and it is relevant to classify and characterize companies by means of their financial properties and different risk profiles. So, it may not be adequate to use a general model for all the companies operating in the European market, as the one proposed by the Directive 2009/138/CE. Solvency II is a general regulatory model such that the volume of own resources will be determined depending on risks based on a calibration reached considering the average behaviour of companies. In order to criticize this approach, we have obtained a characterization of the profiles of companies using a PAM clustering methodology, adapted for longitudinal data, and we have studied the evolution of the obtained groups of companies under a Bayesian approach. In this way, we have introduced a multinomial general dynamic linear model to study the probabilities of the companies to be included into each group. The characterization and identification of these groups suggest that an unique regulatory model may be unsuitable. We have used data from DGSFP (Spanish insurance regulator), with public information about the balance sheets and income statements from years 1999 to 2011.

IFRS 17: mensuração estocástica do ajuste de risco e evidenciação em notas explicativas

“…Isso ocorre devido à diferença entre a estrutura de dependência dos ramos de negócios da seguradora e do mercado utilizado como referência. Albarrán et al (2011) desafiaram o modelo padrão proposto pela EIOPA para Solvência II, afirmando que ele prejudica a alocação ótima de capital, pois sua calibração é feita com valores que refletem um comportamento médio do mercado. Seu estudo mostra que nem todas as empresas que atuam em um determinado mercado possuem o mesmo perfil de risco e, por isso, é insatisfatório usar um modelo geral para todas as seguradoras.…”