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Return on Capital of insurance companies under Solvency II

Author

Listed:
  • Vojtěch Pivný

Abstract

New insurance industry regulation Solvency II will go live starting 1.1.2016. There is included a calculation of the solvency requirement. The regulation provides with options from standard approach to fully internal approach of risk modelling. The article shows advantages and disadvantages of different approaches. Following selected model the article links together regulatory outputs in form of company capitalization with financial measure - Return on Economic Capital. At the same time author provides insight to standard financial measure - Return on Equity as well as economic capital disaggregation to particular products. Lastly, the author presents capitalization of company internal processes effectivity which is the most important example of using model in the business practice.

Suggested Citation

  • Vojtěch Pivný, 2014. "Return on Capital of insurance companies under Solvency II," Ekonomika a Management, Prague University of Economics and Business, vol. 2014(1).
    • Handle: RePEc:prg:jnleam:v:2014:y:2014:i:1:id:221
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    More about this item

    Keywords

    Solvency II; Economic Capital; Rentability; Solvency II; Ekonomický kapitál; Výnosnost;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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