Solvency : Models, Assessment and Regulation

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Until now there were no published analyses of the recent solvency work conducted in Europe, specifically the risk categories proposed by the International Actuarial Association (IAA). Answering the insurance industry's demand in the wake of the EU Solvency II project, Solvency: Models, Assessment and Regulation provides a concrete summary and review of solvency and inspires additional work in the field. Following an introduction to the concept, the first section of the book provides a historical review of solvency, detailing solvency regulation and accounting within the EU. A review of the steps leading to Solvency II looks at accounting, supervision, the actuarial field, the first phase of Solvency II, international approaches to banking, and the solvency systems of 12 major nations. The second section explores the current basis for solvency modeling, focusing on the valuation of assets and liabilities, dependency and various conservative approaches, as well as a baseline and benchmark approach. This section also provides examples of risk structure and the effects of diversification. The final section discusses groups and internal modeling as it relates to EU Solvency II. It addresses insurance groups, financial conglomerates, reinsurance, the importance of internal modeling and stress testing, and the current state of the second phase of EU Solvency more

Product details

  • Hardback | 448 pages
  • 160 x 236.2 x 33mm | 739.37g
  • Taylor & Francis Inc
  • Chapman & Hall/CRC
  • United States
  • English
  • 26 black & white illustrations, 61 black & white tables
  • 1584885548
  • 9781584885542

Table of contents

Introduction General Outline of the Book Organizations A Selection of Solvency Readings Solvency: What Is It? In the 18th Century What Does Solvency Mean? PAST AND PRESENT: A HISTORICAL REVIEW AND DIFFERENT APPROACHES TO SOLVENCY The European Union: Solvency 0 and Accounting The Works of Campagne Other Steps toward the First Directives The Non-Life Directives (First, Second, and Third) The Life Directives (First, Second, and Third) Calculating the Solvency Margin for Non-Life Insurance Business The Insurance Accounting Directive (IAD) The European Union: Solvency I The Muller Report Comments from Groupe Consultatif The Solvency I Directives Calculating the Solvency Margin for Non-Life Insurance Business Steps toward Solvency II: Bank for International Settlements (BIS): The New Basel Capital Accord IASB: Toward a New Accounting System IAIS: Insurance Principles and Guidelines IAA: A Global Framework for Solvency Assessment EU: Solvency II - Phase I Steps toward Solvency II: 2 Australia Canada Denmark Finland The Netherlands Singapore Sweden Switzerland U.K. U.S. Some Other Systems Summary of Different Systems PRESENT: MODELING A STANDARD APPROACH The Fundamental Ideas A Model for the Solvency Assessment Level of Capital Requirements Risks and Diversification Risk Measures Valuations Fair Value: Introduction Purposes of Valuation Best Estimate of Insurance Liability and Technical Provisions Fair Value Dependencies, Baseline, and Benchmark Models Risk Measures Assume Normality Assume Nonnormality Correlations between Risks: Different Levels of Conservatism Parameters in a Factor-Based Model One Example of Risk Categories and Diversification Insurance Risk Market Risk Credit Risk Operational Risk Liquidity Risk Dependency A Proposal for a Standard Approach: From Formula to Spreadsheet The Insurance Risk, CIR Market Risk, CMR Credit Risk, CCR Operational Risk, COR The Total Factor-Based Model A Spreadsheet Approach Parameter Estimates An Example PART C PRESENT AND FUTURE: EU SOLVENCY II - PHASE 2: GROUPS AND INTERNAL MODELING IN BRIEF The European Union: Reinsurance, Insurance Groups, and Financial Conglomerates Reinsurance Insurance Groups and Financial Conglomerates The European Union: Solvency II - Phase II Recommendations for the First Pillar Recommendations for the Second Pillar Recommendations for the Third Pillar General Considerations The First Wave of Requests (Pillar II) The Second Wave of Requests Will Include the Following Issues (Pillar I) The Third Wave of Requests Will Include the Following Issues (Pillar III) A Brief Summary Further Steps Internal Models and Risk Management Forecasting the Future and Risk Management APPENDICES Appendix A A Proposal for a Standard Approach: One Step toward Application Insurance Risk Market Risk Credit Risk Operational Risk Appendix B Insurance Classes Non-Life Classes Life Classes Appendix C From the Non-Life Directives Solvency 0 Solvency I Appendix D From the Life Directives Solvency 0 Solvency I Appendix E IAIS: Insurance Principles, Standards, and Guidelines Principles Standards Guidances Appendix F From the Proposed Reinsurance Directive Chapter 3: Rules Relating to the Solvency Margin and to the Guarantee Fund Appendix G Annex I and Annex II in the Insurance Group Directive Annex I : Calculation of the Adjusted Solvency of Insurance Undertakings Annex II: Supplementary Supervision for Insurance Undertakings That Are Subsidiaries of an Insurance Holding Company, a Reinsurance Undertaking or a Non-Member-Country Insurance Undertaking Appendix H From the Financial Conglomerates Directive Amendments to the Non-Life Directive Made (EEC, 1973) Amendments to the Life Directive (EEC, 1979) Amendments to the Insurance Group Directive (COM, 1998) Annex I: Capital Adequacy Appendix I Prudent Person Rule Article 18: Investment Rulesshow more

Review quote

"... a timely and thorough historical analysis of the recent European work on solvency and financial strength and related accounting issues ... The book provides readers with a veritable 'Who's Who' of the numerous organizations intimately involved in the EU solvency debate ... The author unquestionably succeeds, incorporating several detailed quantitative examples through a well-written and organized text. ... Overall, the book offers a thorough and thoughtful discussion of the current state of evolution regarding solvency regulation, theory, and research in the EU. Policymakers, insurance academics, researchers, students, and other interested parties around the world may find this book highly relevant in understanding solvency models, formulation, assessment, and the debate over alternative strategies for reform. The book offers an objective overview of the issues that is understandable to both technical and nontechnical readers as well as important insights into identifying the key players, theory, and application across diverse and potentially unfamiliar systems." -The Journal of Risk and Insurance, December 2009 "...the first available reference to offer a comprehensive account of the recent solvency work conducted in Europe. It provides a nice and very useful summary of the recent developments in the important area of asset and liability management that have been carried out in recent years, answering the insurance industry's demand in the wake of the EU's Solvency II project. ... This book is well written, well organized and a very rich source of useful information for decision makers in the insurance industry, practitioners of the actuarial profession and financial asset managers. Researchers in both the fields of actuarial science and financial economics may find it informative and inspiring to further research in the field of asset and liability modeling." -Scandinavian Actuarial Journalshow more

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