Immunisation is not a static strategy as the literature affirms: we argue that the conditions established for reaching immunisation are unbalanced in themselves as times go on. This paper presents a valid, comprehensive strategy with all the conditions and assumptions made. It is checked in the Spanish debt market with data from 2004 to 2013 using some immunised portfolios preset following these conditions so that there is no rebalancing. The authors find a strategy that eliminates the requirement of rebalancing because of time passing or due to the mere parallel shift of interest rates regarding the yields that should have been obtained under the hypothesis of the rational expectations theory.

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Immunization is an investment strategy often used by insurance companies. Usually, this strategy takes into account the first‐ and second‐order of Taylor series (Duration and Convexity). However, the model itself has risk because of the difference between the real and estimated value via duration and convexity approximation. Therefore, the aim of this article is to find a better immunization model avoiding the effect of unexpected interest rate shocks by adding more terms of Taylor series to an immunization strategy. As criteria of efficiency, the paper checks the effect of interest rate risk in several immunization models upon a 99.5% confidence level (risk level of 1 in 200 scenarios), as required by Solvency II in Europe, to determine a better immunization strategy. This work analyses the skewness and, consequently, the fitness of adding third‐ and fourth‐order Taylor series. The main finding is that the model with four factors avoids the influence of interest rate shocks. Therefore, the capital on risk in near zero.

Determining optimal capital at insurance companies is a constant requirement in all countries. In Europe this process is guided by the Solvency II Directive. There are local regulations for determining this capital, but this Directive provides a new way of integrating them. The aim of this paper is to analyse the different solutions that have been used in Spain to adapt solvency capital requirements to this compulsory Directive, in order for companies to guarantee the commitments of policyholders. We analyse how the way in which solvency capital is calculated has changed over the past thirty years, emphasising the shift from a static approach to a dynamic one. This has meant that several modifications have had to be made in the organisational structure of organizations and in their management.

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