Exploring different methods to calculate Risk Adjustment following IFRS 17 guidelines

Dissertation presented as the partial requirement for obtaining a Master's degree in Statistics and Information Management, specialization in Risk Analysis and ManagementNas últimas décadas, as seguradoras têm enfrentado uma série de mudanças nos seus sistemas regulatórios e de supervisão, às quais precisam constantemente de se adaptar dentro de prazos explícitos, a fim de cumprir as modificações necessárias. Os requisitos mais significativos, em mais de 20 anos, para moldar a maneira como as divulgações financeiras de uma seguradora são realizadas são dados no IFRS 17 (International Financial Reporting Standard 17), lançado em maio de 2017 pelo International Accounting Standards Board (IASB). Um elemento importante desta norma introduz e discute os cálculos para ajuste de risco de riscos não financeiros. Este aspecto específico da norma é de certa forma interessante devido à possibilidade de as seguradoras implementarem a sua própria abordagem para este cálculo, desde que atenda às condições mínimas impostas pela IFRS 17. Este trabalho visa explorar duas principais abordagens fortemente sugeridas por especialistas da indústria, a fim de determinar, através de extensa revisão da literatura e análise de resultados, a mais adequada. Um contexto apropriado é dado em termos de outros requisitos regulatórios relevantes que, sem dúvida, devem ser integrados à IFRS 17, juntamente com as definições necessárias que são cruciais para o entendimento completo deste estudo. No geral, este documento chegará a uma conclusão destacando os benefícios e os desafios da adoção de cada método além de compará-los.For the last decades, insurers have faced several changes in their regulatory and supervisory systems, to which they have to consistently adapt in explicit time frames to comply with any necessary modifications. The most significant requirements released in over 20 years to shape the way insurers’ financial disclosures are done appear in the IFRS 17 (International Financial Reporting Standard 17), released in May 2017 by the International Accounting Standards Board (IASB). One important element of this standard introduces and discusses the calculations for risk adjustment of non-financial risks. This specific aspect of this standard is somewhat interesting due to the possibility for insurers to implement their approach for this calculation as long as it satisfies the minimum conditions imposed by the IFRS 17. This paper aims to explore two main different approaches strongly suggested by specialists in the industry, to determine, through extensive literature review and analysis of results, the most adequate one. Appropriate context is given in terms of other relevant regulatory requirements which should be undoubtedly integrated with the IFRS 17, along with any necessary definitions which are crucial to the full understanding of this study. Overall, this paper concludes by highlighting the benefits and challenges of adopting each method and comparing them

Investment policy statement : Lusitania non-life portfolio (excluding workman’s compensation)

The Following Investment Policy Statement (IPS) report was written following the CFA Institute recommended format and considers the public information available until the 15th of May 2023, any available information after this date was not considered. Lusitania is an insurance company, founded in 1986, with 100% of Portuguese capital. Lusitania offers a wide range of products, including accidents, motor, housing, and health insurance. The stated objective of this IPS encompasses the creation of two distinct portfolios. The first portfolio aims to achieve immunization by funding the liabilities at the lowest possible cost. The second portfolio pursues optimization, targeting a minimum return of 2.5% above risk-free rate, while simultaneously maintaining volatility below 7.5%. It is crucial that the construction of these portfolios adheres rigorously to all specified restrictions, including exposure limits within asset classes. Additionally, all investments within the portfolios are denominated in euros, ensuring uniformity in currency denomination. The construction of these portfolios was executed, considering the limitations specified by Lusitania. Various strategies, such as duration and cash flow matching, were employed to attain the defined objectives, especially in the immunization portfolio. Sources, including Refinitiv, Lusitania Reports, and the JP Morgan “2023 Long Term Market Expectations” document, were consulted and utilized in the preparation of this report. The investment committee must deliver detailed risk data every quarter in addition to performance reports, such as Value at Risk.O presente relatório Investment Policy Statement foi escrito em linha com o formato recomendado pelo CFA Institute e considera a informação pública disponível até ao dia 15 de Maio de 2023, qualquer informação posterior não foi considerada. Lusitania, é uma companhia de seguros, fundada em 1986, de capitais totalmente nacionais. A Lusitania oferece um vasto leque de produtos, dos quais se destacam os seguros de acidente, automóvel e saúde. O principal objetivo deste IPS é a criação de dois portfólios distintos. O primeiro portfólio visa alcançar a imunização, financiando as responsabilidades ao menor custo possível. O segundo portfólio visa a otimização, com um retorno mínimo de 2,5% e uma volatilidade abaixo de 7.5%. É crucial que a construção desses portfólios adira rigorosamente a todas as restrições especificadas, incluindo limites de exposição dentro das classes de ativos. Além disso, todos os investimentos nos portfólios são denominados em euros, eliminando o risco cambial. A construção desses portfólios foi feita levando em consideração as limitações especificadas pela Lusitania. Diversas estratégias, como a duration matching e cash-flow matching, foram utilizadas para alcançar os objetivos definidos, especialmente no portfólio de imunização. Fontes como Refinitiv, Relatórios Lusitania e “2023 Long-Term Market Expectations”do JP Morgan, foram consultadas e utilizadas na preparação deste relatório. O comitê de investimentos deve fornecer, além de relatórios de performance, dados de risco detalhados trimestralmente, como Value at Risk.Mestrado Bolonha em Finançasinfo:eu-repo/semantics/publishedVersio

The Risk Landscape within FinTech and InsurTech Business Models

The FinTech/InsurTech-based business models are gradually maturing and disrupting the offering and management of financial services (banking, financial and insurance) on the global stage. However, understanding of the risk landscape of the FinTech and InsurTech business models remains at an early stage due to the diverse nature of their activities and the rapid development of the field. Although FinTech and InsurTech offer the opportunity to accelerate economic growth and expand financial affordability/inclusion in all countries, they pose new risks to financial stability and integrity. This book contains five articles that offer a discussion of state-of-the-art developments or introduce new theoretical or practical advances in the identification, measurement and management of the risks arising from the FinTech/InsurTech-based business models

Proceedings of the Researchers‘ Corner for the 12th Annual Meeting of the Sponsoring Group Reinsurance 2019

The 12th Annual Meeting of the Sponsoring Group Reinsurance [Förderkreis Rückversicherung] was held 5th July 2019 in Niederkassel, near Cologne. Some 80 representatives of the (re)insurance companies involved in the Sponsoring Group took part in the meeting, along with guests. Offered for the fifth time as part of the Annual Meeting, the Researchers’ Corner gave eight members of academic staff at the Cologne Research Centre for Reinsurance an opportunity to deliver a presentation on their respective current research projects. In three sessions – each featuring 2-3 parallel lectures with posters – the most important results of the scientific studies by the Cologne Research Centre for Reinsurance were presented and discussed. The heterogeneity of the topics presented by academic staff reflects the dovetailing of Cologne Research Centre with reinsurance practice. Session 1 a) Manuel Dietmann (M.Sc.): The increasing importance of the riskmanagement function in insurance companies b) Robert Joniec (M.Sc., FCII, cand. PhD): How is the reinsurance cycle doing? c) Wolfgang Koch (M.Sc., FCII): Information asymmetries between reinsurance brokers and assignors Session 2 a) Jörg Dirks (M.Sc., FCII): Unmanned aircraft – Evolution of the market for aviation (re-)insurance b) Fabian Lassen (M.Sc., FCII): Reducing volatility through use of an insurance swap c) Fabian Pütz (M.Sc., cand. PhD): Transferring cat risks from emerging markets from a macroeconomic perspective Session 3 a) Kai-Olaf Knocks (M.A., FCII): The ILS market in 2019 – discouragement or wait-and-see? b) Lihong Wang (M.Sc., FCII, cand. PhD): China InsurTech development With the publication series, ‘Proceedings of the Researchers’ Corner’, the Cologne Research Centre for Reinsurance meets the desire for publication of the research results of our scholars together with the accompanying posters and discussions. The titles are reproduced in keeping with the above agenda of the Researchers’ Corner for the 12th Annual Meeting of the Sponsoring Group Reinsurance. As part of the event, Prof. Materne also conducted an interview with Mr Ingo Wichelhaus (Senior Director, Mount Street) on the topic of risk management and portfolio management. Particular attention was devoted to the broad spectrum of risk for financing in the shipping sector

Applying high performance computing to profitability and solvency calculations for life assurance contracts

Throughout Europe, the introduction of Solvency II is forcing companies in the life assurance and pensions provision markets to change how they estimate their liabilities. Historically, each solvency assessment required that the estimation of liabilities was performed once, using actuaries' views of economic and demographic trends. Solvency II requires that each assessment of solvency implies a 1-in-200 chance of not being able to meet the liabilities. The underlying stochastic nature of these requirements has introduced significant challenges if the required calculations are to be performed correctly, without resorting to excessive approximations, within practical timescales. Currently, practitioners within UK pension provision companies consider the calculations required to meet new regulations to be outside the realms of anything which is achievable. This project brings the calculations within reach: this thesis shows that it is possible to perform the required calculations in manageable time scales, using entirely reasonable quantities of hardware. This is achieved through the use of several techniques: firstly, a new algorithm has been developed which reduces the computational complexity of the reserving algorithm from O(T2) to O(T) for T projection steps, and is sufficiently general to be applicable to a wide range of non unit-linked policies; secondly, efficient ab-initio code, which may be tuned to optimise its performance on many current architectures, has been written; thirdly, approximations which do not change the result by a significant amount have been introduced; and, finally, high performance computers have been used to run the code. This project demonstrates that the calculations can be completed in under three minutes when using 12,000 cores of a supercomputer, or in under eight hours when using 80 cores of a moderately sized cluster

The Governance of Insurance Undertakings

This open access volume of the AIDA Europe Research Series on Insurance Law and Regulation brings together contributions from authors with different legal cultures. It aims to identify the legal issues that arise from the intersection of two disciplines: insurance law and corporate/company law. These legal issues are examined mainly from the perspective of European Union (EU) law. However, there are also contributions from other legal systems, enriching the perspective with which to approach these issues

The determinants of public service and environmental performance of local governments in Indonesia

Local governments have significant roles to play with respect to providing high-quality public services and maintaining environmental sustainability. However, local communities in developing countries, including Indonesia, still have less access than those in developed countries to effective public services; and are facing increasing risks from environmental degradation. Given these issues for developing countries, this study focuses on the performance of the Indonesian public sector with respect to both the provision of public services and environmental sustainability. This study has two objectives. First, it aims to examine the influences of public sector governance and financial management factors on Indonesian districts' service performance, mediated by financial performance. Second, this study aims to investigate the impacts of public sector governance and financial management factors on districts' environmental performance through the mediating role of financial performance. Indonesia was chosen as an exemplar of developing countries. In this study, public sector governance is represented by financial transparency, accountability, and internal control, while financial management factors are measured by financial flexibility, financial independence, and resource management. Several conceptual models are developed, from which the theoretical relationship between public sector governance, financial management factors, and service and environmental performance are hypothesised. These hypotheses are then tested using a quantitative approach and secondary data. The main findings of this study indicate that public sector governance and financial management factors are positively related to service and environmental performance. The study also confirms the mediation effect of financial performance on service and environmental performance. This study enriches the literature related to the public sectors since it provides incremental evidence regarding the determinant factors of service and environmental performance and develops the theoretical models that investigate the mediating role of financial performance on the performance of local government in a developing country like Indonesia. Future studies in this area could include investigating the effects of other potentially relevant measures, such as innovation and managerial styles