eprintid: 2395
rev_number: 11
eprint_status: archive
userid: 53
dir: disk0/00/00/23/95
datestamp: 2014-12-16 10:32:30
lastmod: 2016-04-06 08:06:17
status_changed: 2014-12-16 10:32:30
type: article
metadata_visibility: show
creators_name: Jevtić, Petar
creators_name: Regis, Luca
creators_id: 
creators_id: luca.regis@imtlucca.it
title: Assessing the solvency of insurance portfolios via a continuous-time cohort model
ispublished: pub
subjects: HD61
subjects: HG
subjects: QA
divisions: EIC
full_text_status: none
keywords: JEL classification: G22; G32     -    Keywords: Longevity risk; Natural hedging; Continuous-time cohort models for longevity; Solvency of insurance portfolios; Solvency requirements; Longevity and interest-rate risk
abstract: This paper evaluates the solvency of a portfolio of assets and liabilities of an insurer subject to both longevity and financial risks. Liabilities are evaluated at fair-value and, as a consequence, interest-rate risk can affect both the assets and the liabilities. Longevity risk is described via a continuous-time cohort model. We evaluate the effects of natural hedging strategies on the risk profile of an insurance portfolio in run-off. Numerical simulations, calibrated to UK historical data, show that systematic longevity risk is of particular importance and needs to be hedged. Natural hedging can improve the solvency of the insurer, if interest-rate risk is appropriately managed. We stress that asset allocation choices should not be independent of the composition of the liability portfolio of the insurer.
date: 2015-03
publication: Insurance: Mathematics and Economics
volume: 61
number: March
publisher: Elsevier
pagerange: 36-47
id_number: doi:10.1016/j.insmatheco.2014.12.002
refereed: TRUE
issn: 0167-6687
official_url: http://www.sciencedirect.com/science/article/pii/S0167668714001632
citation:   Jevtić, Petar and Regis, Luca  Assessing the solvency of insurance portfolios via a continuous-time cohort model.  Insurance: Mathematics and Economics, 61 (March).  pp. 36-47.  ISSN 0167-6687      (2015)