Reevaluation of the capital charge in insurance after a large shock: empirical and theoretical views by Stéphane Loisel

Event Date: 

Monday, April 24, 2017 -
3:30pm to 4:30pm

Event Date Details: 

Refreshments served at 3:15 p.m

Event Location: 

  • South Hall 5607F

Stéphane Loisel — Université Lyon 1

Title: Reevaluation of the capital charge in insurance after a large shock: empirical and theoretical views

Abstract: Motivated by the recent introduction of regulatory stress tests in the Solvency II framework, we study the impact of there-estimation of the tail risk and of loss absorbing capacities on post-stress solvency ratios. Our contribution is threefold: we build the first stylized model for re-estimated solvency ratio in insurance. This leads us to solve a new theoretical problem in statistics: what is the asymptotic impact of a record on the re-estimation of tail quantiles and tail probabilities for classical extreme value estimators? Eventually, we quantify the impact of the re-estimation of tail quantiles and of loss absorbing capacities on real-world solvency ratios thanks to regulator data from Banque de France (ACPR). In particular, this sheds a first light on the role of the loss absorbing capacity and its paramount importance in the Solvency II capital charge computations. Our paper ends with policy recommendations for insurance regulators. Joint work with F. Borel-Mathurin and J. Segers.