Explain the two-level approach to determine the capital requirements under Solvency II. Which models can the insurance companies choose to calculate their capital requirements and how do these models differ?
Two level approach
MCR: no breach, otherwise supervisory intervention / withdrawal of license => 25-45% of SCR
SCR: 99.5% VaR over one year - insolvency risk should not exceed 0.5% over 1 year and there must be enough capital to cover losses/risks with 99.5% probability over next year
Models
Standard model
Internal model
Mixed model
Differences
Precision of risk mapping
Complexity of calculation/assumptions
Internal model must be approved by supervisory authority
Resource requirements
Ability of internal model to consider company specific risks
Standard model uses basic solvency capital requirement formula
Explain the concept of market consistent valuation of assets and liabilities as applied under solvency II. In this context, please address the determination of best estimate of liabilities
Explain the principle procedure to determine the SCR in Solvency II Standard Model
2 Limitations of insurance CAPM
4 Problems of capital allocation procedures
Name the 3 pillars of solvency II and briefly describe their main content and purpose
Pro/Con Quota Share Insurance and example
Pro/Con Surplus Share RI
Pro/Con Excess of loss per risk
Pro/Con Excess of loss per occurence
What 4 cost types influence the fair insurance premium?
CAT-Bonds
CAT Bonds Moral Hazard Problem of Trigger Index or realized Loss
Limitations and shortcomings of the duration analysis
Standard vs. Internal model to determine SCR pros cons
RORAC
RAROC
EVA
Last changeda year ago
