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Solvency II / SST and Modeling of Risk Aggregation

Malte Obbel Forsberg


SST and Solvency II, while sharing many similarities, differ in a few important areas. In this paper we will explore some standard copulas used for aggregating loss distributions per risk type. Standard practice in the insurance industry is to use the Gaussian copula but there are reasons to believe that this copula is not really suitable in some aspects. The choice of copula has a large impact on the resulting solvency ratio, unfortunately there is often in the insurance industry a problem with FItting real data to a given model.

We will also analyse the diversification of risk between companies within the insurance group studied. Finally and perhaps the largest part of this thesis, the impact of CRTI defaults (i.e., inter-company loans, guarantees, reinsurance etc.) between companies has been studied.

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Tags: COPULA, asymptotix


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