Capital Allocation Methods under Solvency II: A Comparative Analysis

The objective of this document is to analyze different methods that an insurer can use to allocate capital to his or her different lines of business or business segments under Solvency II. For this analysis, a review of the main methods developed in the literature is carried out. Many of the propose...

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Detalles Bibliográficos
Autores: Durán Santomil, Pablo, Otero González, Luis
Tipo de recurso: artículo
Fecha de publicación:2022
País:España
Institución:Universidad de Santiago de Compostela (USC)
Repositorio:Minerva. Repositorio Institucional de la Universidad de Santiago de Compostela
Idioma:inglés
OAI Identifier:oai:minerva.usc.gal:10347/40211
Acceso en línea:https://hdl.handle.net/10347/40211
Access Level:acceso abierto
Palabra clave:Solvency II
Capital allocation
Lines of business (LoBs)
Insurance companies
ERM
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spelling Capital Allocation Methods under Solvency II: A Comparative AnalysisDurán Santomil, PabloOtero González, LuisSolvency IICapital allocationLines of business (LoBs)Insurance companiesERMThe objective of this document is to analyze different methods that an insurer can use to allocate capital to his or her different lines of business or business segments under Solvency II. For this analysis, a review of the main methods developed in the literature is carried out. Many of the proposed methods in the literature can only be implemented with the internal data from the company’s loss distributions. In addition to this, in some of the methods that can be applied with external data, the diversifying effect is in essence not assigned to the lines of business (LoBs) that cause it. Therefore, in this paper, we compare the results of the main methods that can be used with public data and propose a simple method of capital allocation for insurance companies, which does not require knowledge of the loss distribution of an LoB, and which allows the diversification benefit to be assigned only to the LoBs that really cause such an effect. A practical example of the differences between the different methods and the one proposed is shown for better understanding.MDPIUniversidade de Santiago de Compostela. Departamento de Economía Financeira e Contabilidade20222022-01-0120222022-01-01journal articlehttp://purl.org/coar/resource_type/c_6501VoRhttp://purl.org/coar/version/c_970fb48d4fbd8a85info:eu-repo/semantics/articleapplication/pdfhttps://hdl.handle.net/10347/40211reponame:Minerva. Repositorio Institucional de la Universidad de Santiago de Compostelainstname:Universidad de Santiago de Compostela (USC)Inglésengopen accesshttp://purl.org/coar/access_right/c_abf2© 2022 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/).http://creativecommons.org/licenses/by/4.0/info:eu-repo/semantics/openAccessoai:minerva.usc.gal:10347/402112026-06-15T12:47:27Z
dc.title.none.fl_str_mv Capital Allocation Methods under Solvency II: A Comparative Analysis
title Capital Allocation Methods under Solvency II: A Comparative Analysis
spellingShingle Capital Allocation Methods under Solvency II: A Comparative Analysis
Durán Santomil, Pablo
Solvency II
Capital allocation
Lines of business (LoBs)
Insurance companies
ERM
title_short Capital Allocation Methods under Solvency II: A Comparative Analysis
title_full Capital Allocation Methods under Solvency II: A Comparative Analysis
title_fullStr Capital Allocation Methods under Solvency II: A Comparative Analysis
title_full_unstemmed Capital Allocation Methods under Solvency II: A Comparative Analysis
title_sort Capital Allocation Methods under Solvency II: A Comparative Analysis
dc.creator.none.fl_str_mv Durán Santomil, Pablo
Otero González, Luis
author Durán Santomil, Pablo
author_facet Durán Santomil, Pablo
Otero González, Luis
author_role author
author2 Otero González, Luis
author2_role author
dc.contributor.none.fl_str_mv Universidade de Santiago de Compostela. Departamento de Economía Financeira e Contabilidade
dc.subject.none.fl_str_mv Solvency II
Capital allocation
Lines of business (LoBs)
Insurance companies
ERM
topic Solvency II
Capital allocation
Lines of business (LoBs)
Insurance companies
ERM
description The objective of this document is to analyze different methods that an insurer can use to allocate capital to his or her different lines of business or business segments under Solvency II. For this analysis, a review of the main methods developed in the literature is carried out. Many of the proposed methods in the literature can only be implemented with the internal data from the company’s loss distributions. In addition to this, in some of the methods that can be applied with external data, the diversifying effect is in essence not assigned to the lines of business (LoBs) that cause it. Therefore, in this paper, we compare the results of the main methods that can be used with public data and propose a simple method of capital allocation for insurance companies, which does not require knowledge of the loss distribution of an LoB, and which allows the diversification benefit to be assigned only to the LoBs that really cause such an effect. A practical example of the differences between the different methods and the one proposed is shown for better understanding.
publishDate 2022
dc.date.none.fl_str_mv 2022
2022-01-01
2022
2022-01-01
dc.type.none.fl_str_mv journal article
http://purl.org/coar/resource_type/c_6501
VoR
http://purl.org/coar/version/c_970fb48d4fbd8a85
dc.type.openaire.fl_str_mv info:eu-repo/semantics/article
format article
dc.identifier.none.fl_str_mv https://hdl.handle.net/10347/40211
url https://hdl.handle.net/10347/40211
dc.language.none.fl_str_mv Inglés
eng
language_invalid_str_mv Inglés
language eng
dc.rights.none.fl_str_mv open access
http://purl.org/coar/access_right/c_abf2
http://creativecommons.org/licenses/by/4.0/
dc.rights.openaire.fl_str_mv info:eu-repo/semantics/openAccess
rights_invalid_str_mv open access
http://purl.org/coar/access_right/c_abf2
http://creativecommons.org/licenses/by/4.0/
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv MDPI
publisher.none.fl_str_mv MDPI
dc.source.none.fl_str_mv reponame:Minerva. Repositorio Institucional de la Universidad de Santiago de Compostela
instname:Universidad de Santiago de Compostela (USC)
instname_str Universidad de Santiago de Compostela (USC)
reponame_str Minerva. Repositorio Institucional de la Universidad de Santiago de Compostela
collection Minerva. Repositorio Institucional de la Universidad de Santiago de Compostela
repository.name.fl_str_mv
repository.mail.fl_str_mv
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