Peter England: On the lifetime and one-year views of reserve risk, with application to Solvency II and IFRS 17 risk adjustments

Time: Wed 2019-03-27 15.15 - 16.15

Lecturer: Peter England (EMC Actuarial and Analytics, and Cass Business School)

Location: Room 306, House 6, Kräftriket, Department of Mathematics, Stockholm University 

Abstract: This seminar explores the connections between the traditional lifetime view of reserve risk, and the one-year view of Solvency II for P&C insurers, using analytic and simulation-based techniques. Using the model of Mack (1993), it is shown how the lifetime view of risk can be partitioned into a sequence of one-year views. The usefulness of the results for Solvency II cost-of-capital risk margins is demonstrated. The forthcoming IFRS 17 accounting Standard requires a risk adjustment in addition to a discounted best estimate of claims reserves. Although the techniques for estimating the risk adjustment are not prescribed in the Standard, insurers must disclose the "equivalent confidence level" if the "confidence level technique" is not used . The usefulness of the results for IFRS 17 risk adjustments is demonstrated, using risk measures applied to a distribution of the discounted fulfilment cash-flows (lifetime view of risk). The cost-of-capital technique is also discussed for IFRS 17 risk adjustments, and why this is different from Solvency II risk margins.

Belongs to: Department of Mathematics
Last changed: Mar 21, 2019