Politická ekonomie
Politická ekonomie
Prague Economic Papers
University of Economics, Prague

Prague Economic Papers Vol. 26 No. 6

Some Forms of Risk Regulation in Solvency II

DOI: https://doi.org/10.18267/j.pep.638

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Tomáš Cipra, Radek Hendrych

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.

Keywords: actuarial methods, counterparty default risk, reserve risk, risk regulation, Solvency II, technical provisions, underwriting risk

JEL Classification: C02, G22, G28

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