Dependencies and diversification between risks. Patrick Kelliher FIA CERA December 2021

Abstract

From this we can identify linkages between market and credit risks in stressed market conditions to help adjust correlation assumptions for tail dependency.The second part of the paper considers wider dependencies with other risk categories such as insurance risk (including lapse and expense risk) and operational risk. There is usually little data to assess correlations with these risks, which also vary from company to company, so there is a greater degree of reliance on expert judgement and consideration of drivers of dependency.