The Risk in the Insurance Field: A Generalized Analysis
- 1 Department of Economic and Statistics Sciences, University of Salerno, Fisciano (Sa), Italy
- 2 Economics and Finance Scholar, University of Salerno, Fisciano (Sa), Italy
Abstract
The current developments in the insurance system and the innovation in the financial sector have highlighted a series of problems connected to the measurement of the risk and the assessment of the global risk has taken on particular importance. The literature on this interesting topic has led to a new approach that allows to decompose the sources of uncertainty that feed the global risk, to understand the importance of each source and to determine its contribution. This article presents an innovative method to calculate some statistical measures, to quantify the relative importance of each source of uncertainty and to allow analysts, therefore, a certain degree of control over the insurance system. To this end, in the paper, some tools are used and analyzed in detail for the assessment of the financial risk related to the management of a portfolio of life insurances policies such as the coefficient of determination and the risk index of the portfolio, with particular regard to the contribution offered by the pooling risk. In addition, it is shown a measurement of the Arrow-Pratt risk premium, with respect to the demographic risk and the overall market risk, proving that for a risk averse insurer with a certain wealth the two values are in direct proportionality relation.
- Frees, E. (1990) Stochastic Life Contingencies with Solvency Considerations. Transactions of Society of Actuaries, 2, 91-148. https://pdfs.semanticscholar.org/5e84/1d387fbae8141105ab4dfa5a71586012392b.pdf
- Gerber, H.U. (1979) An Introduction to Mathematical Risk Theory. S S Huebner Foundation Monographs, University of Pensylvama Waters H, 37-43. https://doi.org/10.1080/03461238.1979.10413708
- Zhang, Y. and Rachev, S. (2004) Risk Attribution and Portfolio Performance Measurement: An Overview. https://statistik.econ.kit.edu/download/doc_secure1/reviewOct3.pdf
- Marchioro, M. (2011) Relative Portfolio Risk Decomposition and Attribution. https://www.marchioro.org/wp-content/uploads/relative-risk-decomposition.pdf
- Gründl, H., Post, T. and Schulze, T. (2006) To Hedge or Not to Hedge: Managing Demographic Risk in Life Insurance Companies. The Journal of Risk and Insurance, 73, 19-41. https://doi.org/10.1111/j.1539-6975.2006.00164.x
- Norberg, R. (2002) Sensitivity Analysis in Insurance and Finance. Information Processes, 2, 240-242.
- Christiansen, M. (2008) A Sensitivity Analysis of Typical Life Insurance Contracts with Respect to the Technical Basis. Insurance: Mathematics and Economics, 42, 787-796. https://doi.org/10.1016/j.insmatheco.2007.08.005
- Bühlmann, H. (1995) Life Insurance with Stochastic Interest Rates. Financial Risk in Insurance, 1-24. https://doi.org/10.1007/978-3-642-57846-5_1
- Fischer, T. (2004) On the Decomposition of Risk in Life Insurance. https://www.researchgate.net/publication/22856329 9_On_the_decomposition_of_risk_in_life_insurance
- Martin, R. and Tasche, D. (2007) Shortfall: A Tail of Two Parts. Risk, 2, 84-89.
- Christiansen, M. and Helwich, M. (2008) Some Further Ideas Concerning the Interaction between Insurance and Investment Risks. Blätter der DGVFM, 29, 253-266. https://doi.org/10.1007/s11857-008-0053-3
- Rosen, D. and Saunders, D. (2010) Risk Factor Contributions in Portfolio Credit Risk Models. Journal of Banking and Finance, 34, 336-349. https://doi.org/10.1016/j.jbankfin.2009.08.002
- Christiansen, M. (2007) A Joint Analysis of Financial and Biometrical Risks in Life Insurance. Ph.D. Dissertation, Rostock University, Rostock.
- Karabey, U., Kleinow, T. and Cairns, A.J. (2014) Factor Risk Quantification in Annuity Models. Insurance: Mathematics and Economics, 58, 34-45. https://doi.org/10.1016/j.insmatheco.2014.06.004