An internal model for measuring premium risk when determining solvency of non-life insurers
Under contemporary dynamic approaches the solvency of insurance companies is determined by measuring the risks that threaten their business. This paper presents an internal model for measuring premium risk when evaluating the solvency of non-life insurers. The solvency capital requirement i...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Faculty of Economics, Belgrade
2018-01-01
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| Series: | Ekonomski Anali |
| Subjects: | |
| Online Access: | http://www.doiserbia.nb.rs/img/doi/0013-3264/2018/0013-32641817099K.pdf |
| Summary: | Under contemporary dynamic approaches the solvency of insurance companies is
determined by measuring the risks that threaten their business. This paper
presents an internal model for measuring premium risk when evaluating the
solvency of non-life insurers. The solvency capital requirement is
calculated on the basis of a compound distribution of insurance portfolio
aggregate claim amount, resulting from combining separately modelled claim
frequency and severity distributions, with prior verification of earned
technical premium sufficiency. The practical application of the model is
illustrated by a case study of a specific non-life insurance company in
Serbia. The research findings show that the dynamic model of premium risk
measurement results in larger capital requirement and contributes to a more
reliable assessment of insurers’ solvency than the static model. This proves
the inadequacy of the existing fixed ratio model and stresses the need for
changes in the current methodology of determining the solvency of insurance
companies in Serbia. |
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| ISSN: | 0013-3264 1820-7375 |