Study uses AI techniques to predict bank customer solvency.
problem Predicting the solvency of bank customers.
method Data preprocessing, CART decision tree method, SPSS tool.
result Model accuracy and precision of 71%, error rate of 29%.
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48 results for “solvency prediction”
The article proposes a method to make valid insurance claim predictions without relying on specific models.
problem Prediction of insurance claims using statistical models can be unreliable due to model misspecification, selection effects, and lack of finite-sample validity.
method The article employs conformal prediction, a machine learning strategy that is model-free and tuning-parameter-free, ensuring finite-sample validity.
result The proposed method guarantees valid predictions at a pre-assigned coverage probability level and performs well in insurance applications, including meeting Solvency II requirements.
Opportunity Cost in Insuranceq-fin.ST
Optimizes insurance profits under regulatory constraints.
problem Maximizing profits while adhering to regulatory and risk policies.
method Developed a formalism for in-force business profit optimisation.
result Identified optimal asset allocation and annual opportunity cost.
RL-CVaR model improves insurance reserving under economic stress.
problem Managing insurance reserve setting under claim development uncertainty and macroeconomic stress.
method Reinforcement Learning (PPO) with CVaR constraints, trained under regime-aware curriculum.
result RL-CVaR policy reduces solvency violations and tail-risk compared to classical methods.
The implementation of the Own Risk and Solvency Assessment is a critical issue raised by Pillar II of Solvency II framework. In particular the Overall Solvency Needs calculation left the Insurance companies to define an optimal entity-specific solvency constraint on a multi-year time horizon. In a life insurance societ…
This article presents a stochastic framework to quantify the biometric risk of an insurance portfolio in solvency regimes such as Solvency II or the Swiss Solvency Test (SST). The main difficulty in this context constitutes in the proper representation of long term risks in the profit-loss distribution over a one year …
Solvency II Directive 2009/138/EC requires an insurance and reinsurance undertakings assessment of a Solvency Capital Requirement by means of the so-called "Standard Formula" or by means of partial or full internal models. Focusing on the first approach, the bottom-up aggregation formula proposed by the regulator permi…
In this article we consider the parameter risk in the context of internal modelling of the reserve risk under Solvency II. We discuss two opposed perspectives on parameter uncertainty and point out that standard methods of classical reserving focusing on the estimation error of claims reserves are in general not approp…
This article contains the first published example of a real economic balance sheet where the Solvency II ratio substantially depends on the seed selected for the random number generator (RNG) used. The theoretical background and the main quality criteria for RNGs are explained in detail. To serve as a gauge for RNGs, a…
Limited liability creates a conflict of interests between policyholders and shareholders of insurance companies. It provides shareholders with incentives to increase the risk of the insurer's assets and liabilities which, in turn, might reduce the value policyholders attach to and premiums they are willing to pay for i…
Neural networks improve life insurance solvency calculations.
problem Computational challenges in Monte Carlo simulations for life insurance solvency.
method Use of neural networks as a proxy model for risk-neutral pricing.
result Neural networks solve feature engineering and selection problems in replicating portfolios.
This paper formalizes autodeleveraging as online learning, providing robustness results and algorithms for better performance.
problem Autodeleveraging as a mechanism to restore solvency in perpetual futures markets when liquidation and insurance buffers are insufficient.
method Formalizes autodeleveraging as online learning on a PNL-haircut domain, using an algorithm to recover solvency.
result The optimized algorithm achieves about 2.6% of an upper bound on regret, reducing overshoot to $3M.
Framework for realistic insurance liability valuation.
problem Economic realism in insurance liability valuation.
method Replication approach of no-arbitrage theory, considering capital and fulfillment conditions.
result Identifies conditions for market price recovery and extends production for insolvency.
The study improves life insurance surrender risk modeling using various machine learning techniques.
problem Accurate modeling of surrender risk in life insurance to meet Solvency II directive requirements.
method Extensive experiments with XGBoost, random forest, GLM, and neural networks; resampling analysis; time-dependent confidence bands.
result Models trained on resampled data predict significantly biased event probabilities, highlighting the need for complementary assessments.
Analyzes how financial network dependencies can lead to multiple equilibrium outcomes and optimal bailout strategies.
problem Multiple equilibrium outcomes in financial networks due to dependency cycles.
method Characterized necessary and sufficient conditions for bank solvency, and provided upper bounds on optimal bailout payments.
result Minimum bailout payments needed to ensure systemic solvency and prevent cascading defaults.
Neural network model improves longevity risk assessment.
problem Systematic mispricing of longevity risk in linear models.
method Hybrid-Lift framework combining Hierarchical LSTM networks and Mean-Bias Correction.
result Hybrid-Lift outperforms Li-Lee framework by 17.40% in Sweden and 12.57% in West Germany.
Study assesses health plan risk measures for Solvency Capital Requirement.
problem Assessing risk measures for health plans to meet Solvency Capital Requirement.
method Three-part regression model with three GLMs for claim counts, episode allocation, and severity.
result Reduction in regression models compared to traditional methods.
Paper models demand and solvency for index insurance, combining traditional and measurable index-based coverage.
problem Reducing protection gaps for emerging risks.
method Develops a model for demand and solvency conditions, combining traditional and index-based insurance.
result Deduces a product that benefits from both traditional and index-based insurance approaches.
Modeling financial contagion through bank networks, revealing solvency correlations.
problem Understanding how financial shocks propagate through interconnected banks.
method Simulated financial network of 100 banks, randomly generated with varying link probabilities, and shocks applied to 15 banks.
result Ranges of probability values and banks' solvency are positively correlated.
Within the Own Risk and Solvency Assessment framework, the Solvency II directive introduces the need for insurance undertakings to have efficient tools enabling the companies to assess the continuous compliance with regulatory solvency requirements. Because of the great operational complexity resulting from each comple…
On the surplus management of funds with assets and liabilities in presence of solvency requirementsmath.OC
The paper optimizes dividend strategies for companies with assets and liabilities under solvency constraints.
problem Maximizing dividends while adhering to solvency requirements in the face of correlated asset and liability movements.
method Developed verification lemmas to show optimal barrier dividend strategies in two cases: with and without shareholder funding.
result Optimal dividend strategies are barrier-type, derived in closed form and illustrated.
The underlying stochastic nature of the requirements for the Solvency II regulations has introduced significant challenges if the required calculations are to be performed correctly, without resorting to excessive approximations, within practical timescales. It is generally acknowledged by practising actuaries within U…
Introduces a new system for modeling bank solvency contagion with heterogeneous impacts and exposures.
problem Modeling bank solvency contagion with asymmetric interactions and heterogeneous exposures.
method Develops a heterogeneous McKean-Vlasov system to characterize solvency contagion in interbank markets.
result Derives a unique solution for the system under certain conditions, resolving instability issues.
The economic equities maximization criterion (MFPE) leads to the choice of financial portfolio, which maximizes the ratio of the expected value of the insurance company on the capital. This criterion is presented in the framework of a non-life insurance company and is applied within the framework of the French legislat…
In this paper we study data from the yearly reports the four major Swedish non-life insurers have sent to the Swedish Financial Supervisory Authority (FSA). We aim at finding marginal distributions of, and dependence between, losses on the five largest lines of business (LoBs) in order to create models for Solvency Cap…
The paper proves ADL mechanisms face a trilemma and optimizes them for fairness, revenue, and exchange solvency.
problem The impossibility of a perpetual futures exchange achieving solvency, revenue, and fairness.
method Formal model of ADL, proving trilemma, and analyzing three ADL mechanisms.
result Optimized ADL mechanisms can reduce trader losses while maintaining exchange solvency.
Optimizes pension fund management under funding risks.
problem Managing DB pension fund under underfunded and overfunded conditions.
method Stochastic model with Ornstein-Uhlenbeck interest rate, geometric Brownian motion for benefits, and cash, bond, stock investments.
result Optimal wealth process, portfolio, and efficient frontier obtained under various tolerance levels for solvency risk.
When assessing group solvency, an important question is to what extent intragroup transfers may be considered, as this determines to which extent diversification can be achieved. We suggest a framework to describe the families of admissible transfers that range from the free movement of capital to excluding any transac…
Using Decision Tree Learner to Classify Solvency Position for Thai Non-life Insurance Companiesq-fin.RM
This paper introduces a Decision Tree Learner as an early warning system for classification of the non-life insurance companies according to their financial solid as strong, moderate, weak, or insolvency. In this study, we ran several experiments to show that the proposed model can achieve a good result using standard …
Paper proposes a copula method to generate unfavorable VaR scenarios.
problem Creating unfavorable VaR scenarios for insurance models.
method Patchwork copulas to create unfavorable VaR scenarios with given marginal distributions.
result Demonstrated with a 19-dimensional real-life insurance losses data set.
New algorithm improves insurance company's asset allocation decisions.
problem Strategic asset allocation with multiple objectives (risk, return, solvency, distance to current portfolio).
method Exact multi-objective optimization algorithm incorporating four objectives.
result Significant improvement in portfolio quality and decision-making process.
As part of the new regulatory framework of Solvency II, introduced by the European Union, insurance companies are required to monitor their solvency by computing a key risk metric called the Solvency Capital Requirement (SCR). The official description of the SCR is not rigorous and has lead researchers to develop their…
A new method for calculating ES from VaR under Solvency II.
problem The need for a more appropriate risk measure (ES) than VaR.
method Developed PELVE method for multiple insurers, analyzing existence, uniqueness, and expressions for different payoff distributions.
result The choice of method is crucial when payoffs are from different distribution families.
In the paper we develop mathematical tools of quantile hedging in incomplete market. Those could be used for two significant applications: o calculating the \textbf{optimal capital requirement imposed by Solvency II} (Directive 2009/138/EC of the European Parliament and of the Council) when the market and non-market ri…
Optimizes bank capital structure under Basel III constraints, simplifying complex dynamics.
problem Optimizing risky investments, dividends, and capital structure under Basel III constraints.
method Formulated as a stochastic control problem, reducing dynamics to a one-dimensional process in leverage ratio.
result Simple policy: pay dividends at an upper barrier and recapitalize at the distress boundary.
Under Solvency II the computation of capital requirements is based on value at risk (V@R). V@R is a quantile-based risk measure and neglects extreme risks in the tail. V@R belongs to the family of distortion risk measures. A serious deficiency of V@R is that firms can hide their total downside risk in corporate network…
Based on a point of view that solvency and security are first, this paper considers regular-singular stochastic optimal control problem of a large insurance company facing positive transaction cost asked by reinsurer under solvency constraint. The company controls proportional reinsurance and dividend pay-out policy to…
Compact formulas for evaluating insurance policies' risks.
problem Quantifying demographic risk in insurance portfolios.
method Cohort-based approach with market-consistent valuation.
result Formal closed formula for idiosyncratic risk (accidental mortality).
New eco-systemic prudential policies aim to finance green companies, reducing systemic financial risk.
problem Insufficient financing for green companies despite available savings and monetary management.
method Reorient corporate accounting towards socio-environmental solvency, facilitating access with public guarantees.
result Green financing increases, reducing systemic financial risk and promoting less leveraged investments.
New formulas estimate life insurance benefits with less computation.
problem Estimating future discretionary benefits in life insurance.
method Derive analytic formulas for lower and upper bounds of FDB.
result Simple estimator for FDB with average of lower and upper bounds.
Generative neural networks improve insurance market risk modeling.
problem Creating realistic market risk scenarios for insurance companies.
method Using generative adversarial networks (GANs) to generate economic scenarios.
result GAN-based models produce similar results to traditional regulatory models.
The aim of this paper is to introduce a method for computing the allocated Solvency II Capital Requirement (SCR) of each Risk which the company is exposed to, taking in account for the diversification effect among different risks. The method suggested is based on the Euler principle. We show that it has very suitable p…
Assessing the Solvency of Virtual Asset Service Providers: Are Current Standards Sufficient?q-fin.GN
The paper assesses VASPs' solvency using multiple data sources.
problem Insolvency risk in VASPs without systematic auditing.
method Cross-referencing cryptoasset wallets, balance sheets, and supervisory data.
result Inconsistent data between DLT transactions and balance sheets for some VASPs.
Study validates Libor model for insurance benefits calculation.
problem Valuation of long-term insurance guarantees.
method Mean-field Libor market model, numerical ALM, aggregated life insurance data.
result Derives estimators for future discretionary benefits.
The real estate is a pillar industry of China's national economy. Due to changes in policy and market conditions, the real estate companies are facing greater pressures to survive in a competitive environment. They must improve their financial competitiveness. Based on the conceptual framework of financial competitiven…
Paper develops a model to assess capital requirement for demographic risk using stochastic methods.
problem Quantifying capital requirement for demographic risk in life insurance contracts.
method Stochastic model extending local GAAP to Solvency II framework, proving market consistency.
result Model highlights main drivers of capital requirement evaluation, comparing to GAAP.
This paper optimizes insurance reinsurance design under solvency constraints.
problem Optimizing risk transfer from an insurance company to a reinsurer under solvency constraints.
method Martingale method to derive optimal reinsurance design maximizing terminal value of surplus.
result Optimal reinsurance designs include a combination of proportional and stop-loss protection.
This paper evaluates financial competitiveness of Indian real estate companies using entropy method.
problem Improving financial competitiveness of Indian real estate companies in a competitive market.
method Financial competitiveness evaluation index system using key financial ratios and a scoring system.
result Companies with high scores have strong profitability and operational capacity, while those with lower scores struggle with solvency and working capital.