IDEAS home Printed from https://ideas.repec.org/a/pal/gpprii/v33y2008i3p440-463.html
   My bibliography  Save this article

The Relevance of Portfolio Management Action for Solvency Measurement

Author

Listed:
  • Alexander König

    (Swiss Re, Mythenquai 50/60, Zurich 8022, Switzerland.)

  • Axel Brohm

    (Industrial Risk Insurer – Swiss Reinsurance Company, Mythenquai 50/60, Zurich 8022, Switzerland.)

Abstract

Solvency II aims at capturing the true risk landscape of an insurer with immediate consequences for the regulatory capital required. One key element of every risk management approach is the so-called reversibility option available to the insurer's management that involves the change of a decision taken in the past in order to adapt to a modified risk landscape. This paper analyses the effects of simple strategies formulated by the insurer's management in an ex ante setting and carried out during the solvency assessment period on the Value at Risk (VaR) of a two-stock portfolio. We show that the effect of even simple strategies is non-negligible for the portfolio's VaR and hence for the required capital when using an internal model under Solvency II. The issue discussed affects both Pillars I and II of Solvency II and will therefore be one focal point of discussion between insurers and regulators when reviewing internal models. The Geneva Papers (2008) 33, 440–463. doi:10.1057/gpp.2008.18

Suggested Citation

  • Alexander König & Axel Brohm, 2008. "The Relevance of Portfolio Management Action for Solvency Measurement," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 33(3), pages 440-463, July.
    • Handle: RePEc:pal:gpprii:v:33:y:2008:i:3:p:440-463
    as

    Download full text from publisher

    File URL: http://www.palgrave-journals.com/gpp/journal/v33/n3/pdf/gpp200818a.pdf
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: http://www.palgrave-journals.com/gpp/journal/v33/n3/full/gpp200818a.html
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:gpprii:v:33:y:2008:i:3:p:440-463. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.