One-year Value-at-Risk for longevity and mortality
Upcoming new regulation on regulatory required solvency capital for insurers will be predominantly based on a one-year Value-at-Risk measure. This measure aims at covering the risk of the variation in the projection year as well as the risk of changes in the best estimate projection for future years. This paper addresses the issue how to determine this Value-at-Risk for longevity and mortality risk. Naturally, this requires stochastic mortality rates. In the past decennium, a vast literature on stochastic mortality models has been developed. However, very few of them are suitable for determining the one-year Value-at-Risk. This requires a model for mortality trends instead of mortality rates. Therefore, we will introduce a stochastic mortality trend model that fits this purpose. The model is transparent, easy to interpret and based on well known concepts in stochastic mortality modeling. Additionally, we introduce an approximation method based on duration and convexity concepts to apply the stochastic mortality rates to specific insurance portfolios.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
When requesting a correction, please mention this item's handle: RePEc:eee:insuma:v:49:y:2011:i:3:p:462-470. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.