Wolters Kluwer: Risk Management For Solvency II And Beyond: A Survey Of Some Recent Methods
Posted: 7 July 2011 | Source: Wolters Kluwer
There is a long list of observed failures in risk management of banks, insurances and corporate firms, which have occurred during or outside financial crises times. A plethora of analyses and lessons learnt from them have been
published, among others Kimball(2000), IAA(2003), Blankfein(2009), Varma(2009) and CEIOPS(2009). With the emergence of a risk management science, several academic responses to Basel II and Solvency II have appeared (e.g. Danielsson et al.(2001), Dhaene et al.(2008)) and a lot of quantitative risk management studies and books have been published in the last decade.
The financial stability of almost all financial institutions (banks, insurance companies, pension funds) has been affected through several adverse events including crash in equity markets, fall in bond yields and increased longevity. Changes in accounting rules, enhanced solvency regulation and a stronger competition have increased the need on financial reporting issues (IFRS, EEV) and solvency requirements (Solvency II, SST). All these issues demand a unified treatment of risk management and financial profitability analysis. In fact, integrated risk management solutions are required to approach the various objectives. However, better risk based regulation is coupled with a number of challenging issues. Without being exhaustive and with restriction to the own knowledge and necessarily biased interests, the present survey is devoted to some important remarks concerning the topics of risk modeling, ordering of risk, statistics and numerical evaluation. It contains my observations on the recent paper from CEIOPS(2009) but is equally relevant to insurance market because it provides an advanced overview on some new solutions and open issues around the Solvency II project and risk management methods in general.