ERM in insurance groups: Measuring risk concentration and default risk

Submitted on 25th June 2015

 

In financial conglomerates and insurance groups, enterprise risk management is becoming increasingly important in controlling and managing the different independent legal entities in the group. The aim of this paper is to assess and relate risk concentration and joint default probabilities of the group’s legal entities in order to achieve a more comprehensive picture of an insurance group’s risk situation. We further examine the impact of the type of dependence structure on results by comparing linear and nonlinear dependencies using different copula concepts under certain distributional assumptions. Our results show that even if financial groups with different dependence structures do have the same risk concentration factor, joint default probabilities of different sets of subsidiaries can vary tremendously.

Source
International Actuarial Association
Length of Resource
26
Author
Gatzert, Nadine; Schmeiser, Hato; Schuckmann, Stefan
Date Published
Publication Type
paper
Resource Type
academic