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Empirical risk analysis of pension insurance: the case of Germany

Author

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  • Schmieder, Christian
  • Reinschmidt, Timo
  • Mager, Ferdinand
  • Gerke, Wolfgang

Abstract

With this paper we seek to contribute to the literature on pension insurance systems. The financial literature tends to focus exclusively on the US pension insurance system. This is the first major empirical study to address the German occupational pension insurance (PSVaG) plan in Germany. The study is based on a Merton-type one-factor model, in which we determine the credit portfolio risk profile of the occupational pension insurance plan and compare two alternative pricing plans. We find that there is a low, yet non-negligible risk of very high losses that may threaten the existence of the occupational pension insurance plan (PSVaG). While relating risk premiums to firms' default probabilities would cause them to diverge widely, a marginal risk contribution method would produce less pronounced differences compared to the current, uniform pricing plan.

Suggested Citation

  • Schmieder, Christian & Reinschmidt, Timo & Mager, Ferdinand & Gerke, Wolfgang, 2006. "Empirical risk analysis of pension insurance: the case of Germany," Discussion Paper Series 2: Banking and Financial Studies 2006,07, Deutsche Bundesbank.
  • Handle: RePEc:zbw:bubdp2:4772
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    Cited by:

    1. Stein, Ingrid, 2011. "The price impact of lending relationships," Discussion Paper Series 2: Banking and Financial Studies 2011,04, Deutsche Bundesbank, Research Centre.
    2. M. B. Gordy & E. Lutkebohmert, 2013. "Granularity Adjustment for Regulatory Capital Assessment," International Journal of Central Banking, International Journal of Central Banking, vol. 9(3), pages 38-77, September.
    3. Mager, Ferdinand & Schmieder, Christian, 2008. "Stress testing of real credit portfolios," Discussion Paper Series 2: Banking and Financial Studies 2008,17, Deutsche Bundesbank, Research Centre.

    More about this item

    Keywords

    Pension insurance; Risk-adjusted premiums; Credit portfolio risk;

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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