Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/195867 
Year of Publication: 
2018
Citation: 
[Journal:] Risks [ISSN:] 2227-9091 [Volume:] 6 [Issue:] 3 [Publisher:] MDPI [Place:] Basel [Year:] 2018 [Pages:] 1-29
Publisher: 
MDPI, Basel
Abstract: 
We study the dynamics of the one-year change in P&C insurance reserves estimation by analyzing the process that leads to the ultimate risk in the case of 'fixed-sum' insurance contracts. The random variable ultimately is supposed to follow a binomial distribution. We compute explicitly various quantities of interest, in particular the Solvency Capital Requirement for one year change and the Risk Margin, using the characteristics of the underlying model. We then compare them with the same figures calculated with existing risk estimation methods. In particular, our study shows that standard methods (Merz-Wüthrich) can lead to materially incorrect results if the assumptions are not fulfilled. This is due to a multiplicative error assumption behind the standard methods, whereas our example has an additive error propagation as often happens in practice.
Subjects: 
one-year risk
Merz–Wüthrich
solvency II
solvency capital requirement
risk margin
fixed-sum insurance
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article
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