Market Consistent ALM for Life Insurers—Steps toward Solvency II

Bragt, David van; Steehouwer, Hens; Waalwijk, Bart

doi:10.1057/gpp.2009.34

Cited by 24 publications

(13 citation statements)

References 3 publications

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“…Furthermore, the valuation of indexations is important for hedging strategies. See for similar experiments, for example, van Bragt and Steehouwer (2007), Possen and van Bragt (2009) and van Bragt, Waalwijk, and Steehouwer (2010).…”

Section: Valuation Of the Indexation Provision Of A Pension Fundmentioning

confidence: 84%

Pricing inflation products with stochastic volatility and stochastic interest rates

Singor

Grzelak

Bragt

et al. 2013

Insurance: Mathematics and Economics

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We consider a Heston type inflation model in combination with a Hull-White model for nominal and real interest rates, in which all the correlations can be non-zero. Due to the presence of the Heston dynamics our derived inflation model is able to capture the implied volatility skew/smile, which is present in the inflation option market data. We derive an efficient approximate semi-closed pricing formula for two types of inflation dependent options: index and year-on-year inflation options. The derived pricing formulas allow for an efficient calibration of the inflation model. We also illustrate our approach using a real-life pension fund example, where the Heston Hull-White model is used to determine the value of conditional future indexations.

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Section: Valuation Of the Indexation Provision Of A Pension Fundmentioning

confidence: 84%

Pricing inflation products with stochastic volatility and stochastic interest rates

Singor

Grzelak

Bragt

et al. 2013

Insurance: Mathematics and Economics

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“…As a result, insurers will struggle to meet required returns in the current low-interest-rate environment. Van Bragt et al (2010) analyze the impact of different investment policies on the capital requirements (according to QIS4) for a representative life insurer. They find that the investment policy, in terms of portfolio structure and asset duration, may impact decisively on the regulatory capital requirements.…”

Section: Solvency IImentioning

confidence: 99%

Effects of Solvency II on Portfolio Efficiency, The Case of Real Estate and Infrastructure Investments

Schreck¹,

Heinrich²

2017

17ª Conferência Internacional Da LARES

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We examine the potential effects of Solvency II on general portfolio efficiency, and specifically on the allocation of alternative assets by European insurers. The paper starts with a brief introduction to the Solvency II Directive, focusing on the rules for calculating the Solvency capital requirements (SCR), according to the standard formula. The following empirical analysis entails several portfolio optimizations considering six relevant asset classes for the time period from 1993-2013. We derive optimal portfolios with respect to portfolio risk and capital requirements, and finally combine both optimization problems. Our results suggest that, although the capital charges for real estate and infrastructure assets are not adequately calibrated, a significant shift of portfolio weights is not expected for the majority of European insurers. However, after Solvency II comes into effect, undercapitalized insurers may often not be capable of holding risk-optimal allocations of alternative assets.

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“…Similarly to enhancements of MPT, ALM also focuses on dynamic aspect, so the dynamic asset allocation strategies are being developed, which help control risks more effectively (Leung, 2011). Based on the recent developments, the impact of the Solvency II regime on investment policy of life insurance companies from the point of ensuring the required capital is also being analysed (Bragt et at 2010).…”

Section: Literature Overviewmentioning

confidence: 99%