Petit déjeuner de la chaire « Market inconsistencies » par Nicole El Karoui

elkaroui-sem-s« Market inconsistencies »

Le 7 juin 2016 de 9h à 10h30
Amphithéâtre Louis Le Grand ( BNP Paribas)
3 rue Louis Le Grand – 75002 PARIS

Inscriptions en ligne

Abstract : The Solvency II directive has introduced a specific so-called risk-neutral framework to valuate economic accounting quantities throughout European life insurance companies. The adaptation of this theoretical notion for regulatory purposes requires the addition of a specific criterion, namely the market-consistency, in order to objectify the choice of the valuation probability measure. This paper aims at pointing out and fixing some of the major risk sources embedded in the current regulatory life insurance valuation scheme. We compare actuarial and financial valuation schemes. We then address first operational issues and potential market manipulation sources in life insurance, induced by both theoretical and regulatory pitfalls. For example, we show that calibrating the interest rate model in October 2014 instead of December 31st 2014 generates a 140%-increase in the economic own funds of a representative French life insurance company. We propose various adaptations of the current implementations, including product-specific valuation scheme, to limit the impact of these market-inconsistencies.

Filed under: Séminaires trimestriels

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