Prague Economic Papers 2017, 26(6):722-743 | DOI: 10.18267/j.pep.638

Some Forms of Risk Regulation in Solvency II

Tomáš Cipra1, Radek Hendrych2
1 Department of Probability and Mathematical Statistics, Faculty of Mathematics and Physics, Charles University in Prague, Prague, Czech Republic (cipra@karlin.mff.cuni.cz)
2 Department of Probability and Mathematical Statistics, Faculty of Mathematics and Physics, Charles University in Prague, Prague, Czech Republic (hendrych@karlin.mff.cuni.cz)

The contribution deals with the risk regulation in the framework of Solvency II, which is the new regulatory system in insurance valid in majority of the EU countries since 2016. It concentrates on the underwriting risk (in particular, on the reserve risk) and on the counterparty default risk (i.e. mainly on the reinsurers' default risk), since such risks are crucial for insurance activities. Various actuarial approaches to the underwriting risk applied by subjects respected by insurance regulators and supervisors are surveyed. Moreover, one of them suggests by means of a real data example a simplified approach to the reserve risk, which may be appreciated in practice just for its simplicity. As to the counterparty default risk, the paper presents a method that can be suitable when the reinsurers form a small group of heterogeneous subjects imperilled by a common shock as a financial crisis or a natural catastrophe; this methodological approach is also demonstrated by a numerical example.

Klíčová slova: risk regulation, Solvency II, underwriting risk, reserve risk, technical provisions, counterparty default risk, actuarial methods
JEL classification: C02, G22, G28

Zveřejněno: 1. prosinec 2017  Zobrazit citaci

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Cipra, T., & Hendrych, R. (2017). Some Forms of Risk Regulation in Solvency II. Prague Economic Papers, 26(6), 722-743. doi: 10.18267/j.pep.638
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