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Dr. Ben Zehnwirth Seminar

Research Seminars - business and economics
  • Topic: Solvency II and IFRS4 one-year risk horizon metrics for long tail liabilities
  • Speaker: Dr. Ben Zehnwirth, Managing Director, Insureware Pty Ltd
  • Venue:
  • When: 5th May, 2011, (Thu)
  • Time:

Solvency II is a fundamental review of the capital adequacy regime for the European insurance industry. It aims to establish a revised set of EU-wide capital requirements and risk management standards that will replace the current solvency requirements.

We provide a non-recursive non-circular solution to the Solvency Capital Requirements (SCR) for the one-year risk horizon for the aggregate of long tail liabilities. The Cost of (risk) Capital approach is used to compute Market Value (Risk) Margins and hence Fair Value of Liabilities (Technical Provisions).

  • The one year risk horizon comprises three ingredients:
  • Risk Capital is raised at the beginning of each year;
  • The analyses are conditional on the first (next) calendar year being in distress (99.5%);
At the end of the first year in distress, the balance sheet can be “restored†to its Fair Value (of liabilities) in such a way that the liabilities can be transferred to a third party.

Fungibility and Ring Fencing will also be discussed.



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