Project solvency2

solvency2 is a project for building a model to calculate life risks of selected policies at various points in their policy periods based on Solvency II standard formula. This project serves as a reference for building models that contain complex nested projections.

Overview

The model included in this project is named solvency2. The model calculates the capital requirement for life underwriting risk based on Solvency II standard formula by policy and duration.

The overall capital requirement for life underwriting risk, expressed as \(SCR_{life}\), is calculated by aggregating life sub-risks, using a correlation matrix.

Each life sub-risk, as defined in the reference below, is defined as the difference in net asset value under the base (best estimate) scenario and the deterministic scenario with a prescribed stress on the risk factor, except for Lapse risk. For Lapse risk, three (“up”, “down”, “mass”) scenarios are considered.

The model contains a parametric space SCR_Life[t0, PolicyID, ScenID]. SCR_life() cells in each SCR_Life[t0, PolicyID, ScenID] holds the value of Life underwriting risk at time t0 for PolicyID and ScenID (1 by default), calculated based on the solvency capital requirement standard formula under Solvency II.

References:

Model Structure

Composition Structure

blockdiag solvency2 SCR_life[t0, PolicyID, ScenID] Economic Assumptions Policy LifeTable Input PV BaseProj Override Projection[Risk, Shock, Scope] Mortality Lapse LapseMass Expense

Inheritance Structure

blockdiag SCR_life[t0, PolicyID, ScenID] SCR_life PV BaseProj Projection Mortality Lapse LapseMass Expense Override Projection[Risk, Shock, Scope]

Space Details

Assumptions

Assumption input and calculations for individual policies.

BaseProj

Base Space for the Projection Space.

Economic

Source module to create Economic space from.

LifeTable

Commutation functions and actuarial notations

Expense

Override module for the expense risk calculation

Lapse

Override module for the lapse risk calculation

LapseMass

Override module for the mass lapse risk calculation

Mortality

Override module for the mortality/longevity risk calculation

Projection

Policy

Source module to create Policy space from.

PV

Present Value mix-in Space

SCR_life

Source module for Life SCR standard formulas