extras

1. probabiliy of loss (different for individuals and often unknown)

2. Potential damage

3. risk aversion

4. insurance premium

1. value assets at market value

2. calculate BEL and add a risk margin

3. apply schocks / stress scenarios

4. Determine VaR (99.5%)

5. SCR can withstand 99.5% of schocks

Insurance risks

1. underwriting risk (insurance technical risk from accidents, hazard, biometric or fire/storm risk)

Financial risks

1. market risk (credit / default / fx rate / interest rate risk)

2. liquidity risk

3. systematic risk

Internal risks

1. operation risk

2. cost risk

Credibility risk

1. reputational risk

1. making loans

2. taking deposits

3. market making

4. intermediary financial

5. payment function

banks: 10-18% capital

insurance: 120-200% solvency capital

Pre:

1. guarantee of paid in capital (or benefits)

2. fixed promised return (e.g. 2%)

3. profit participation

After 2015:

following the adjustment of long term interest rates to ZERO,

1. guarantee was lowered from 100% to 60-70%

2. promised return was abolished

Risks concerning both

• mortality

• adverse selection

• investment risks

• expense risks

• operational risk

• withdraawal risk (lapse)

additional risks for endownment life

• equity risks (due to variable annuities