Allowance for surplus funds under Solvency II: adequate reflection of risk sharing between policyholders and shareholders in a risk-based solvency framework?

Burkhart, Tobias; Reuß, Andreas; Zwiesler, Hans-Joachim

doi:10.1007/s13385-017-0147-1

Cited by 6 publications

(13 citation statements)

References 7 publications

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“…As analyzed in Burkhart et al (2015Burkhart et al ( , 2017, the allowance for GCR and SF and their recognition as part of the company's BOF is in line with regulatory requirements under Solvency II. However, those papers further mention that in return, the risks resulting from those additional BOF items also have to be reflected in the SCR calculation.…”

Section: The Impact Of Lapse Stresses On Going Concern Reserve and Sumentioning

confidence: 68%

“…In For details regarding GCR and SF see Burkhart et al (2015) and Burkhart et al (2017). of policyholder options must be reflected in the cash flow projection for the BEL.…”

Section: Reflection Of Policyholder Behavior In Quantitative Assessmementioning

confidence: 99%

“…We apply a stochastic balance sheet and cash flow projection model for a stylized life insurance company that covers the relevant features of life insurance in Germany. We extend the model of Burkhart et al (2017), mainly by the policyholder option to surrender the contract. Subsequent analyses include both SF and GCR.…”

Section: Analysis Frameworkmentioning

confidence: 99%

“…The economic value of SF is determined according to the method developed in Burkhart et al (2017). The withdrawals from the RfB are tracked until the total of those withdrawals (undiscounted) exceeds the undeclared RfB at the valuation date, i.e., f R f B 0 + TBF 0 .…”

Section: Allowance For Surplus Fundsmentioning

confidence: 99%

“…The management rules are consistent with current regulation. The parameters are adopted from Burkhart et al (2017). Minor adjustments were made to better fit the current situation in the German life insurance market.…”

Section: Assets Liabilitiesmentioning

confidence: 99%

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Surrender Risk in the Context of the Quantitative Assessment of Participating Life Insurance Contracts under Solvency II

Burkhart¹

2018

Risks

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Participating life insurance contracts entitle the policyholder to participate in the company's annual surplus. Typically, they are also equipped with a surrender option that allows the policyholder to terminate the contract prior to maturity, receiving a predetermined surrender value. The option interacts with (often cliquet-style) interest guarantees that are a key feature of traditional participating contracts. Surrender options can considerably affect an insurer's liabilities and bear material risks. This paper addresses the recognition of those risks in the quantitative assessment of a heterogeneous insurance portfolio under Solvency II, taking into account the complex interrelation between minimum interest guarantees, reserving requirements, and profit sharing. The lapse risk module of the Solvency II standard formula requires the identification of portfolio segments that are exposed to a specific change of surrender rates (long-term increase/decrease, one-off increase). We provide a heuristic that identifies homogeneous risk groups in the sense that the respective stress would increase the insurer's liabilities. Our approach can be used to derive an appropriate segmentation in practical applications. We further analyze implications of the segmentation on the Risk Margin (as part of the Technical Provisions under Solvency II) and discuss consequences of policyholder options on the calculation of Going Concern Reserve and Surplus Funds. To illustrate our findings, we set up a stochastic balance sheet and cash flow projection model for a stylized life insurance company. We conclude that current methods used for practical applications underestimate surrender risk under Solvency II and that the proposed modeling refinements may improve the appropriateness of solvency ratios for participating business.

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Section: The Impact Of Lapse Stresses On Going Concern Reserve and Sumentioning

confidence: 68%

“…In For details regarding GCR and SF see Burkhart et al (2015) and Burkhart et al (2017). of policyholder options must be reflected in the cash flow projection for the BEL.…”

Section: Reflection Of Policyholder Behavior In Quantitative Assessmementioning

confidence: 99%

Section: Analysis Frameworkmentioning

confidence: 99%

Section: Allowance For Surplus Fundsmentioning

confidence: 99%

Section: Assets Liabilitiesmentioning

confidence: 99%

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Surrender Risk in the Context of the Quantitative Assessment of Participating Life Insurance Contracts under Solvency II

Burkhart¹

2018

Risks

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Solvency II, the European Government of Insurance Industry and Private Health Insurance

Benoît

2020

Private Health Insurance and the European Union

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Werden bei einer Differenzierung der Überschussbeteiligung in der Lebensversicherung Neukunden zu Lasten des Bestands bevorzugt?

Eckert

2022

ZVersWiss

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ZusammenfassungKlassische Lebensversicherungsverträge mit Überschussbeteiligung bilden weiterhin einen großen Anteil des Geschäftes von Lebensversicherungsunternehmen. Aufgrund der anhaltenden Niedrigzinsphase werden die Garantien von neuen Versicherungsprodukten zunehmend reduziert. Als Ausgleich für die reduzierten Garantien wird Neukunden bei manchen Anbietern eine erhöhte Beteiligung an den erwirtschafteten Überschüssen in Aussicht gestellt. Es wird somit bei der Überschussdeklaration zwischen Bestandskunden und Neukunden differenziert. In dieser Arbeit sollen die Auswirkungen einer Differenzierung der Überschussbeteiligung auf Bestandskunde und Neukunde sowie auf die Profitabilität des Aktionärs untersucht werden. Zur Ermittlung der Höhe der Differenzierung werden die im Ergebnisbericht der Deutschen Aktuarvereinigung e. V. (DAV (2017)) beschriebenen Methoden verwendet. Es wird im Speziellen gezeigt, dass in dem verwendeten Basisszenario die erwartete Rentabilität der Bestandskunden bei einer Neugeschäftsstrategie mit abgesenkter Garantie und erhöhter Überschussbeteiligung leicht geringer ausfällt als bei einer Neugeschäftsstrategie ohne Reduktion der Garantie und ohne Differenzierung der Überschussbeteiligung. Außerdem wird darauf eingegangen, wie die Abnahme der erwarteten Rentabilität der Bestandskunden kompensiert werden kann. Das verwendete Modell legt einen starken Fokus auf die Überschussbeteiligung im deutschen Versicherungsmarkt.

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Allowance for surplus funds under Solvency II: adequate reflection of risk sharing between policyholders and shareholders in a risk-based solvency framework?

Cited by 6 publications

References 7 publications

Surrender Risk in the Context of the Quantitative Assessment of Participating Life Insurance Contracts under Solvency II

Surrender Risk in the Context of the Quantitative Assessment of Participating Life Insurance Contracts under Solvency II

Solvency II, the European Government of Insurance Industry and Private Health Insurance

Werden bei einer Differenzierung der Überschussbeteiligung in der Lebensversicherung Neukunden zu Lasten des Bestands bevorzugt?

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