Impacts of the regulatory model for market risk capital: application in a special savings company, an insurance company, and a pension fund
ABSTRACT In line with the regulation brought in by Solvency II, the Superintendence of Private Insurance (Susep) introduced the market risk capital requirement at the end of 2015, with 50% of the minimum capital for this type of risk being required by December 31st 2016 and 100% the following year....
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| Format: | Article |
| Language: | English |
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Universidade de São Paulo
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| Series: | Revista Contabilidade & Finanças |
| Subjects: | |
| Online Access: | http://www.scielo.br/scielo.php?script=sci_arttext&pid=S1519-70772017000300465&lng=en&tlng=en |
| _version_ | 1818756830172545024 |
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| author | Betty Lilian Chan Felipe Tumenas Marques |
| author_facet | Betty Lilian Chan Felipe Tumenas Marques |
| author_sort | Betty Lilian Chan |
| collection | DOAJ |
| description | ABSTRACT In line with the regulation brought in by Solvency II, the Superintendence of Private Insurance (Susep) introduced the market risk capital requirement at the end of 2015, with 50% of the minimum capital for this type of risk being required by December 31st 2016 and 100% the following year. This regulatory model consists of calculating parametric value at risk with a 99% confidence level and a three month time horizon, using the net exposure of expected cash flows from assets and liabilities and a covariance matrix updated with market data up to July 2014. One limitation of this regulatory approach is that the updating of the covariance matrix depends on prior approval by the National Council of Private Insurance, which can limit the frequency the covariance matrix is updated and the model’s adherence to the current market reality. As this matrix considers the period before the presidential election, the country’s loss of investment grade status, and the impeachment process, which all contributed to an increase in market volatility, this paper analyses the impacts of applying the regulatory model, considering the market volatility updated to December 31st 2015, for a special savings company (sociedade de capitalização), an insurance company, and an pension fund. Furthermore, the paper discusses the practical implications of the new market risk requirement for managing the investments of the entities supervised by Susep, listing the various assumptions that can be used in the regulated entities’ Asset and Liability Management decision models and possible trade-offs to be addressed in this process. |
| first_indexed | 2024-12-18T06:01:16Z |
| format | Article |
| id | doaj.art-3cfd54e97d7c46a695a2c2f938fdd568 |
| institution | Directory Open Access Journal |
| issn | 1808-057X |
| language | English |
| last_indexed | 2024-12-18T06:01:16Z |
| publisher | Universidade de São Paulo |
| record_format | Article |
| series | Revista Contabilidade & Finanças |
| spelling | doaj.art-3cfd54e97d7c46a695a2c2f938fdd5682022-12-21T21:18:41ZengUniversidade de São PauloRevista Contabilidade & Finanças1808-057X287546547710.1590/1808-057x201703840S1519-70772017000300465Impacts of the regulatory model for market risk capital: application in a special savings company, an insurance company, and a pension fundBetty Lilian ChanFelipe Tumenas MarquesABSTRACT In line with the regulation brought in by Solvency II, the Superintendence of Private Insurance (Susep) introduced the market risk capital requirement at the end of 2015, with 50% of the minimum capital for this type of risk being required by December 31st 2016 and 100% the following year. This regulatory model consists of calculating parametric value at risk with a 99% confidence level and a three month time horizon, using the net exposure of expected cash flows from assets and liabilities and a covariance matrix updated with market data up to July 2014. One limitation of this regulatory approach is that the updating of the covariance matrix depends on prior approval by the National Council of Private Insurance, which can limit the frequency the covariance matrix is updated and the model’s adherence to the current market reality. As this matrix considers the period before the presidential election, the country’s loss of investment grade status, and the impeachment process, which all contributed to an increase in market volatility, this paper analyses the impacts of applying the regulatory model, considering the market volatility updated to December 31st 2015, for a special savings company (sociedade de capitalização), an insurance company, and an pension fund. Furthermore, the paper discusses the practical implications of the new market risk requirement for managing the investments of the entities supervised by Susep, listing the various assumptions that can be used in the regulated entities’ Asset and Liability Management decision models and possible trade-offs to be addressed in this process.http://www.scielo.br/scielo.php?script=sci_arttext&pid=S1519-70772017000300465&lng=en&tlng=encapital regulatóriocapital para risco de mercadosolvênciaprevidênciaentidade aberta de previdência complementar |
| spellingShingle | Betty Lilian Chan Felipe Tumenas Marques Impacts of the regulatory model for market risk capital: application in a special savings company, an insurance company, and a pension fund Revista Contabilidade & Finanças capital regulatório capital para risco de mercado solvência previdência entidade aberta de previdência complementar |
| title | Impacts of the regulatory model for market risk capital: application in a special savings company, an insurance company, and a pension fund |
| title_full | Impacts of the regulatory model for market risk capital: application in a special savings company, an insurance company, and a pension fund |
| title_fullStr | Impacts of the regulatory model for market risk capital: application in a special savings company, an insurance company, and a pension fund |
| title_full_unstemmed | Impacts of the regulatory model for market risk capital: application in a special savings company, an insurance company, and a pension fund |
| title_short | Impacts of the regulatory model for market risk capital: application in a special savings company, an insurance company, and a pension fund |
| title_sort | impacts of the regulatory model for market risk capital application in a special savings company an insurance company and a pension fund |
| topic | capital regulatório capital para risco de mercado solvência previdência entidade aberta de previdência complementar |
| url | http://www.scielo.br/scielo.php?script=sci_arttext&pid=S1519-70772017000300465&lng=en&tlng=en |
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