Vakuutussektorin tutkimukset (Vakuutusvalvonta) (2006-2008)

 

Recent Submissions

  • Ronkainen, Vesa; Koskinen, Lasse; Koskela, Laura (2008)
    In the EU the supervision of the insurance industry is expected to step into the new Solvency II framework within some years. The new framework will mean a fundamental update for both valuation and solvency requirements. Instead of just offering a standard formula for calculating the solvency capital requirement, in Solvency II insurance companies will be encouraged to develop internal models that are expected to be able to assess numerous effects which would not be easily quantified using the “one fits all” standard approach. However, to develop an internal model that will satisfy the approval criteria is a major project, during which the model builders and implementers will be faced with serious challenges.
  • Korhonen, Pekka; Koskinen, Lasse (2008)
    In this paper, we explore critical aspects related to the use and development of internal models in insurance companies’ risk and capital management. Our aim is to find out how crucial the various risk factors of internal models are for successful performance of essential management sub-tasks. The problem is approached hierarchically starting from relevant management sub-tasks, then analyzing the possible causes for the failure of the firm, and finally ending up with an analysis of the most important risk components which have to be taken into account when internal models are used and developed. As source information for causal and risk factors, we use a cause effect model of the European insurance supervisors and an international insurance survey. The problem is formulated as a multiple criteria decision making task with a hierarchical structure. We use the Analytical Hierarchy Process as a planning tool to analyze management criteria, causal and risk factors. The evaluation is carried out by a panel consisting of senior managers of Finnish insurance companies. As a result, we obtain a list and rank order of the key risk components for the use and development of internal models. The results also illustrate the potential usefulness of decision science tools when making subjective decisions in the context of internal models.
  • Luoma, Arto; Puustelli, Anne; Koskinen, Lasse (2008)
    In this paper a Bayesian approach is utilized to analyze the role of the underlying asset and interest rate model in the market consistent valuation of life insurance policies. The focus is on a novel application of advanced theoretical and computational methods. A guaranteed participating contract embedding an American-style option is considered. This option is valued using the regression method. We exploit the flexibility inborn in Markov Chain Monte Carlo methods in order to deal with a fairly realistic valuation framework. The Bayesian approach enables us to address model and parameter error issues. Our empirical results support the use of elaborated instead of stylized models for asset dynamics in practical applications. Furthermore, it appears that the choice of model and initial values is essential for risk management.
  • Kaliva, Kasimir; Koskinen, Lasse (2008)
    In this paper we quantify the risk caused by the crash of a pricing bubble in the US stock market by utilizing a recently introduced econometric bubble model. The skewness and kurtosis are shown to vary widely with the price-dividend ratio. Simulation experiments quantify how the moments and VaR of the predictive distribution depend on the holding period, the price-dividend ratio and inflation. This information is useful in deciding on market timing and needed risk capital. In addition the analysis of higher moments support the old wisdom that stocks are a more attractive investment in the long run than in the short run.
  • Koskela, Laura; Ronkainen, Vesa; Puustelli, Anne (2008)
    Vakuutusvalvonta. Reports 1
    Raportissa tutustumme eräisiin yleisiin stokastisiin osake- ja korkomalleihin päähuomion ollessa pitkäntähtäimen simulaatioissa, jotka ovat tyypillistä mm. henki- ja eläkevakuuttamiselle. Pohdimme käytännön mallintamisen eri vaiheita Solvenssi II -projektin sisäisten mallien näkökulmasta.