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

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  • Stéphane Loisel

    (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon)

Abstract
Motivated by the recent introduction of regulatory stress tests in the Solvency II framework, we study the impact of the re-estimation of the tail risk and of loss absorbing capacities on post-stress solvency ratios. Our contribution is threefold. First, we build the first stylised model for re-estimated solvency ratio in insurance. Second, 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? Third, 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. Our analysis sheds a first light on the role of the loss absorbing capacity and its paramount importance in the Solvency II capital charge computations. We conclude with a number of policy recommendations for insurance regulators.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Stéphane Loisel, 2018. "Reevaluation of the capital charge in insurance after a large shock: empirical and theoretical views," Post-Print hal-02013430, HAL.
    • Handle: RePEc:hal:journl:hal-02013430
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    Cited by:

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    2. Stéphane Loisel, 2014. "Reevaluation of the capital charge in insurance after a large shock: empirical and theoretical views," Post-Print hal-02013669, HAL.
    3. Cyril Pouvelle., 2022. "An Analysis of Financial Conglomerate Resilience: A Perspective on bancassurance in France [Une analyse de la résilience des conglomérats financiers : Une perspective sur la bancassurance en France," Débats économiques et financiers 39, Banque de France.
    4. Dina Manolache Aurora Elena, 2019. "Stress and scenario tests in the context of a Romanian non-life insurance company," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 13(1), pages 149-161, May.
    5. Henri Fraisse & Christophe Hurlin, 2024. "Modèles internes des banques pour le calcul du capital réglementaire (IRB) et intelligence artificielle," Débats économiques et financiers 44, Banque de France.
    6. Eric Monnet, & Angelo Riva, & Stefano Ungaro., 2021. "The Real Effects of Bank Runs. Evidence from the French Great Depression (1930-1931) [Les effets réels des ruées bancaires : l’exemple de la Grande Dépression en France (1930-1931)]," Débats économiques et financiers 37, Banque de France.

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    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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