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Capital requirement under SII
Bonds
Equities
Property
Your Pension, Annuity and Life
Insurance
Assets Liabilities
Solvency Capital Requirement (SCR): Sufficient capital to withstand a 1 in 200 year shock (99.5% 1yr VaR)
ABC
CFA UK - 24 July 2013
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Asset mix Premium income Indexation policy Payments to policyholders
Difference insurance companies and pension funds
CFA UK - 24 July 2013
𝑆𝑜𝑙𝑣𝑒𝑛𝑐𝑦 𝑟𝑎𝑡𝑖𝑜=𝐴𝑠𝑠𝑒𝑡𝑠
𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠+𝐶𝑎𝑝𝑖𝑡𝑎𝑙𝑟𝑒𝑞𝑢𝑖𝑟𝑒𝑚𝑒𝑛𝑡
Sweet smell of success
9CFA UK - 24 July 2013
0123456789
10
1990 1996 2001 2007 2012
Yiel
d to
mat
urity
in %
Date
YTM Dutch Swap curve
5-year
7-year
10-year
10
Starter choices
Life insurance company• Specialisation• Business as usual• Longer term
Consultancy• Variety• Task/project based• Short term
CFA UK - 24 July 2013
References and links• Actuarial links: www.math.uconn.edu/~valdez/IntActLink.htm
• Actuarial Glossary:
http://www.commerce.uct.ac.za/actuarialscience/resources/glossa
ry/glossary.asp
• CFA UK economic capital special interest group:
https://secure.cfauk.org/about/institute/special-interest/economic
-capital.html
• Solvency II news: http://solvencyiiwire.com/
• UK actuarial institute: www.actuaries.org.uk/
• Networking (free events): Staple Inn Actuarial Society (
http://www.sias.org.uk/)
13CFA UK - 24 July 2013
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About me
Servaas Houben heads the risk scenario
generation team at Prudential, London. He
studied econometrics in the Netherlands
and worked in life insurance for the first
four years of his career. Following this, he
worked in Dublin and London. Besides
actuarial, Servaas completed the CFA and
FRM qualifications, and regularly writes on
his blog, for CFA digest and Dutch actuarial
magazines.
Email: [email protected]: http://actuaryabroad.wordpress.com
CFA UK - 24 July 2013