The Solvency II standard formula measures interest rate risk based on two stress scenarios which are supposed to reflect the 1-in-200 year event over a 12-month time horizon. The calibration of these scenarios appears much too optimistic when comparing them against historical yield curve...

The capital requirements of Solvency II allow insurers to make discretionary choices. Besides extensive possibilities regarding the choice of a risk model (ranging between a regulatory prescribed standard formula to a full self-developed internal model), insurers can make use of transitional...

European insurers are allowed to make discretionary decisions in the calculation of Solvency II capital requirements. These choices include the design of risk models (ranging from a standard formula to a full internal model) and the use of long-term guarantees measures. This article examines the...

Purpose – This paper aims to investigate the interaction between capital requirements and pricing constraints as measures for insurance regulation. Design/methodology/approach – In a theoretical model framework, the author derives the insurer’s shareholder-value-maximizing response to...