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Econometric Model of the Czech Life Insurance Market

Author

Listed:
  • Radek Hendrych
  • Tomáš Cipra

Abstract

The aim of the article is to introduce a complex econometric model of cash-flows for the Czech life insurance market. Namely, technical-actuarial links among insurance variables observed in annually published summary balance sheets of life insurers are described by means of an econometric system of linear simultaneous equations. The suggested model is statistically verified and thus it can provide useful economic interpretations. Further, adjusted residual bootstrapping is introduced in this context as a straightforward alternative which can solve possible problems with questionable asymptotic distribution properties of residuals. This technique can be applied e.g. for signifi cance testing purposes. Finally, an important practical illustration of scenario analysis is considered. Such an analysis might be really useful, e.g. for internal calculations of the Czech life insurers, financial planning or stress testing in the framework of Solvency II. Two general approaches are presented: deterministic and stochastic. The second one is capable of delivering various empirical probabilities concerning possible future developments.

Suggested Citation

  • Radek Hendrych & Tomáš Cipra, 2015. "Econometric Model of the Czech Life Insurance Market," Prague Economic Papers, University of Economics, Prague, vol. 2015(2), pages 173-191.
  • Handle: RePEc:prg:jnlpep:v:2015:y:2015:i:2:id:507:p:173-191
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    References listed on IDEAS

    as
    1. Bénédicte Vidaillet & V. D'Estaintot & P. Abécassis, 2005. "Introduction," Post-Print hal-00287137, HAL.
    2. Etti G. Baranoff & Savas Papadopoulos & Thomas W. Sager, 2007. "Capital and Risk Revisited: A Structural Equation Model Approach for Life Insurers," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 74(3), pages 653-681.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Solvency II; scenario analysis; residual bootstrap; life insurance; insurance market; econometric system of simultaneous equations; econometric model;

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C39 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Other
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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