Tools for testing the Solvency Capital Requirement for life insurance

Longevity risk is one of the major risks that an insurance company or a pension fund has to deal with and it is expected that its importance will grow in the near future. In agreement with these considerations, in Solvency II regulation the Standard formula furnished for calculating the Solvency Capital Requirement explicitly considers this kind of risk. According to the new European rules in our paper we suggest a multiperiod approach to evaluate the SCR for longevity risk. We propose a backtesting framework for measuring the consistency of SCR calculations for life insurance policies

A discursive view of value co-destruction: The dieselgate case

The value creation based on the interaction is a core topic of the marketing discipline, in particular of Service-Dominant (S-D) logic that has prompted the conceptual shift from value as embedded in firms’ offerings to value as the phenomenological outcome of an experience created collaboratively by different actors within the service ecosystem (Lusch and Vargo, 2014). However, the definition of service, the foundational premises, and in general the lexicon utilized by S-D logic studies reveal an overoptimistic view of these processes (Plé and Chumpitaz Cáceres, 2010). The implicit assumption is that the interaction among actors results in value co-creation, thus most of the S-D logic studies fails to consider the potential negative elements and outcomes that may emerge. The aim of this research is to analyze the dark side of value co-creation, that is the value co-destruction process (Plé and Chumpitaz Cáceres, 2010), from the ecosystem approach. The study shows how the dark-side of co-creation affects on the market practices and how the dark-side of market practices shapes the value co-destruction in service ecosystem

Risk Sources in a Life Annuity Portfolio: Decomposition and Measurement Tools

The paper considers a model for a homogeneous portfolio of whole life annuities immediate. The aim is to study two risk factors: the investment risk and the insurance risk. A stochastic model of the rate of return is used to study these risk factors. Measures of the insurance risk and the investment risk for the entire portfolio are suggested. The problem of the longevity risk is presented, and its consequences with different projections of the mortality tables are analyzed. The model is applied to some concrete cases, and several illustrations show the importance of the two components of the riskiness in terms of the number of policies in the portfolio. Understanding these risks will allow insurance companies to control, to some extent, the overall risk of their annuity portfolios

Further Remarks on Risk Sources Measuring: The Case of a Life Annuity Portfolio

The paper considers a model that allows the actuary to measure the riskiness connected to the randomness of projected mortality tables in evaluating a portfolio of life annuities, obtaining a measure to reflect the risk associated with the randomness of the projection. The coherence of the risk parameters with the specific nature of the considered risk sources is also discussed. Numerical examples illustrate the results, showing the importance of the risk components in terms of the number of policies and comparing measure tools obtained by means of two procedures

Further Remarks on Risk Sources Measuring: The Case of a Life Annuity Portfolio

The paper considers a model that allows the actuary to measure the riskiness connected to the randomness of projected mortality tables in evaluating a portfolio of life annuities, obtaining a measure to reflect the risk associated with the randomness of the projection. The coherence of the risk parameters with the specific nature of the considered risk sources is also discussed. Numerical examples illustrate the results, showing the importance of the risk components in terms of the number of policies and comparing measure tools obtained by means of two procedures

Basis risk in solvency capital requirements for longevity risk

The international guidelines of Solvency II prescribe a regulation which should help insurance industry mitigating undesired outcomes arising from the exposure to the systemic risks. In particular, the rules on Solvency Capital Requirements recommend to separately compute them for each risk factor, where for the longevity risk sub-module the Solvency Capital Requirement results by the change in net asset value (NAV) due to a longevity shock which actually assumes a permanent reduction of the mortality rates for all ages by 20%. Nevertheless, the data based on statistics coming from various national longevity indices differ from those deriving from the regulatory assessment of solvency, determining significant underestimations or overestimations: A basis risk comes from a questionable adequacy of the longevity shock. This paper contributes to the discussion on Solvency Capital Requirements by focusing on the main features of the potential basis risk which determines the inappropriate capitalization of insurance companies. Furthermore we analyze the sensitivities of the basis risk to different ages for better assessing the actual risk of insurance portfolios

Fair value and demographic aspects of the insured loans

The paper deals with the liability valuation of the insured loan in compliance of the fair value requirements for the financial assets and liabilities, as mapped out by the international boards engaged in this tool. Initially we propose a closed form for the fair valuation of the mathematical provision in a framework in which the randomness in the mortality is considered along with the financial risk component. Furthermore, the aim of the paper is to analyze the relevance of the risk arising from the demographic movements on the insured loan reserve. The approach we follow implies the mathematical provision calculated as current values, this meaning at current interest rates and at current mortality rates. In these two variables the basic risk drivers of a life insurance business dwell and the many-sided risk system consists, in its systematic aspects, in the choice of the adequate models for forecasting the future scenarios. The relevance of the impact of the risk connected to the choice of the mortality table (table risk) on the fair value of the mathematical provision is pointed out and quantified using a measurement tool obtained by conditional expectation calculus. The risk mapping is performed analyzing the accidental risk impact on the insured loan portfolio liabilities. In all likelihood, insured loan portfolios are not large enough to be considered well diversified to the aim of the pooling risk reduction; this consideration makes interesting the measuring of the liability variability caused by the random events connected to mortality (mortality risk). Practical implications of assuming different mortality scenarios on the reserve fair value are presented, a graphic description of the model risk deriving from the choice of the demographic model is provided and numerical evidences of the accidental mortality risk are show

Synthesis, structural studies and biological properties of new TBA analogues containing an acyclic nucleotide

A new modified acyclic nucleoside, namely N(1)-(3-hydroxy-2-hydroxymethyl-2-methylpropyl)-thymidine, was synthesized and transformed into a building block useful for oligonucleotide (ON) automated synthesis. A series of modified thrombin binding aptamers (TBAs) in which the new acyclic nucleoside replaces, one at the time, the thymidine residues were then synthesized and characterized by UV, CD, MS, and (1)H NMR. The biological activity of the resulting TBAs was tested by Prothrombin Time assay (PT assay) and by purified fibrinogen clotting assay. From a structural point of view, nearly all the new TBA analogues show a similar behavior as the unmodified counterpart, being able to fold into a bimolecular or monomolecular quadruplex structure depending on the nature of monovalent cations (sodium or potassium) coordinated in the quadruplex core. From the comparison of structural and biological data, some important structure-activity relationships emerged, particularly when the modification involved the TT loops. In agreement with previous studies we found that the folding ability of TBA analogues is more affected by modifications involving positions 4 and 13, rather than positions 3 and 12. On the other hand, the highest anti-thrombin activities were detected for aptamers containing the modification at T13 or T12 positions, thus indicating that the effects produced by the introduction of the acyclic nucleoside on the biological activity are not tightly connected with structure stabilities. It is noteworthy that the modification at T7 produces an ON being more stable and active than the natural TBA