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The Estimation of Standard Deviation of Premium Risk Under Solvency 2

In: Mathematical and Statistical Methods for Actuarial Sciences and Finance

Author

Listed:
  • Rocco Roberto Cerchiara

    (University of Calabria)

  • Vittorio Magatti

    (University of Rome La Sapienza)

Abstract

Solvency 2 Directive provides a range of methods to calculate the Solvency Capital Requirement (SCR). Focusing on the Standard Formula (SF) approach with Undertaking-Specific Parameters (USPs), the Technical Specifications (TS) of Quantitative Impact Study 5 (QIS5) describes a subset of the SF market parameters (standard deviations) that may be replaced by USPs, in order to calculate the SCR deriving from Premium Risk, using three different standardised methods. Compared to the existing literature and practice, this paper innovates in that this standard deviation will be calculated using a Partial Internal Risk Model (PIRM), based on Generalised Linear or Additive Models (GLM or GAM), showing how the techniques usually developed for premium calculation could be useful for this goal.

Suggested Citation

  • Rocco Roberto Cerchiara & Vittorio Magatti, 2014. "The Estimation of Standard Deviation of Premium Risk Under Solvency 2," Springer Books, in: Cira Perna & Marilena Sibillo (ed.), Mathematical and Statistical Methods for Actuarial Sciences and Finance, edition 127, pages 61-64, Springer.
    • Handle: RePEc:spr:sprchp:978-3-319-05014-0_14
    DOI: 10.1007/978-3-319-05014-0_14
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