THE SOLVENCY II APPROACH ON THE CAPITAL CHARGE FOR THE NON-LIFE CATASTROPHIC RISK
This paper addresses a current issue: the assessment and the establishment of the capital charge for the non-life catastrophic risk (cat risk) in terms of Solvency II Directive. Firstly we’ll present several aspects on the conditions and the defining elements of Solvency II Directive implementation,...
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| Format: | Article |
| Language: | deu |
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University of Oradea
2014-07-01
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| Series: | Annals of the University of Oradea: Economic Science |
| Subjects: | |
| Online Access: | http://anale.steconomiceuoradea.ro/volume/2014/n1/096.pdf |
| _version_ | 1811241699335208960 |
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| author | Ciumas Cristina Coca Ramona Alexandrina Oniga Alexandra |
| author_facet | Ciumas Cristina Coca Ramona Alexandrina Oniga Alexandra |
| author_sort | Ciumas Cristina |
| collection | DOAJ |
| description | This paper addresses a current issue: the assessment and the establishment of the capital charge for the non-life catastrophic risk (cat risk) in terms of Solvency II Directive. Firstly we’ll present several aspects on the conditions and the defining elements of Solvency II Directive implementation, by positioning us in the underwriting risk module, cat risk being a component of it. Nowadays the cat risk is a concern for the insurance companies and in order to have an harmonized legislation on the insurance industry for all Member States of the European Union this was a sensitive topic being presented various approaches regarding the methods used for determining the level of the capital charge. We’ll present the main methods proposed in the Quantitative Impact Studies QIS4: standard approach, scenarios and personalized scenarios and also those proposed in QIS5: standardised scenarios and factor-based approach. Our purpose is to illustrate the situations when each alternative is most efficient to be used and also the steps taken from one quantitative impact study to another in order to have an accurate method of the cat risk assessment. Taking into account that these are standardised formulas, there are certain cases when the results are not consistent with the reality, especially for the insurers with a different structure of the insured portfolio, for example those having a large part of the insurance policies issued for a single line of business. In these cases it is recommended to use undertaking specific parameters (USP). Once presented these methods we’ll offer an example for the calculation of the capital charge for the earthquake risk using standardised scenarios for Natural Disaster Insurance Pool (PAID). In order to achieve this goal we’ll perform an analysis of the mandatory household insurance policies against natural disasters (PAD policies) in force in December 2013, these being grouped on CRESTA zones to determine the total insured value for each of the 41 zones in Romania. These values being calculated and using the technical parameters offered by an Annex of QIS 5 we obtained a value of around 227 million Euro for the earthquake cat capital requirement for PAID. |
| first_indexed | 2024-04-12T13:40:20Z |
| format | Article |
| id | doaj.art-5dc9143246694f57a07d5297b66c0298 |
| institution | Directory Open Access Journal |
| issn | 1222-569X 1582-5450 |
| language | deu |
| last_indexed | 2024-04-12T13:40:20Z |
| publishDate | 2014-07-01 |
| publisher | University of Oradea |
| record_format | Article |
| series | Annals of the University of Oradea: Economic Science |
| spelling | doaj.art-5dc9143246694f57a07d5297b66c02982022-12-22T03:30:52ZdeuUniversity of OradeaAnnals of the University of Oradea: Economic Science1222-569X1582-54502014-07-01231874882THE SOLVENCY II APPROACH ON THE CAPITAL CHARGE FOR THE NON-LIFE CATASTROPHIC RISKCiumas Cristina0Coca Ramona Alexandrina1Oniga Alexandra2 Babes-Bolyai University, Cluj - Napoca, Romania,Department of Finance, Faculty of Economics and Business AdministrationBabes-Bolyai University, Cluj - Napoca, Romania,Department of Finance, Faculty of Economics and Business AdministrationBabes-Bolyai University, Cluj - Napoca, Romania,Department of Finance, Faculty of Economics and Business AdministrationThis paper addresses a current issue: the assessment and the establishment of the capital charge for the non-life catastrophic risk (cat risk) in terms of Solvency II Directive. Firstly we’ll present several aspects on the conditions and the defining elements of Solvency II Directive implementation, by positioning us in the underwriting risk module, cat risk being a component of it. Nowadays the cat risk is a concern for the insurance companies and in order to have an harmonized legislation on the insurance industry for all Member States of the European Union this was a sensitive topic being presented various approaches regarding the methods used for determining the level of the capital charge. We’ll present the main methods proposed in the Quantitative Impact Studies QIS4: standard approach, scenarios and personalized scenarios and also those proposed in QIS5: standardised scenarios and factor-based approach. Our purpose is to illustrate the situations when each alternative is most efficient to be used and also the steps taken from one quantitative impact study to another in order to have an accurate method of the cat risk assessment. Taking into account that these are standardised formulas, there are certain cases when the results are not consistent with the reality, especially for the insurers with a different structure of the insured portfolio, for example those having a large part of the insurance policies issued for a single line of business. In these cases it is recommended to use undertaking specific parameters (USP). Once presented these methods we’ll offer an example for the calculation of the capital charge for the earthquake risk using standardised scenarios for Natural Disaster Insurance Pool (PAID). In order to achieve this goal we’ll perform an analysis of the mandatory household insurance policies against natural disasters (PAD policies) in force in December 2013, these being grouped on CRESTA zones to determine the total insured value for each of the 41 zones in Romania. These values being calculated and using the technical parameters offered by an Annex of QIS 5 we obtained a value of around 227 million Euro for the earthquake cat capital requirement for PAID.http://anale.steconomiceuoradea.ro/volume/2014/n1/096.pdfCRESTA zones, cat risk, Quantitative Impact Studies |
| spellingShingle | Ciumas Cristina Coca Ramona Alexandrina Oniga Alexandra THE SOLVENCY II APPROACH ON THE CAPITAL CHARGE FOR THE NON-LIFE CATASTROPHIC RISK Annals of the University of Oradea: Economic Science CRESTA zones, cat risk, Quantitative Impact Studies |
| title | THE SOLVENCY II APPROACH ON THE CAPITAL CHARGE FOR THE NON-LIFE CATASTROPHIC RISK |
| title_full | THE SOLVENCY II APPROACH ON THE CAPITAL CHARGE FOR THE NON-LIFE CATASTROPHIC RISK |
| title_fullStr | THE SOLVENCY II APPROACH ON THE CAPITAL CHARGE FOR THE NON-LIFE CATASTROPHIC RISK |
| title_full_unstemmed | THE SOLVENCY II APPROACH ON THE CAPITAL CHARGE FOR THE NON-LIFE CATASTROPHIC RISK |
| title_short | THE SOLVENCY II APPROACH ON THE CAPITAL CHARGE FOR THE NON-LIFE CATASTROPHIC RISK |
| title_sort | solvency ii approach on the capital charge for the non life catastrophic risk |
| topic | CRESTA zones, cat risk, Quantitative Impact Studies |
| url | http://anale.steconomiceuoradea.ro/volume/2014/n1/096.pdf |
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