The fall of AIG is another confirmation that the insurance business is not immune to bankruptcy. Contrary to the actuarial literature which postulates that insurance firms can survive forever, we believe that this is not the case, and that a realistic and business-oriented risk management...

In this paper, we construct new valuation schemes for the liabilities and economic capital of insurance companies. Specifically, we first build a valuation framework based on SAHARA utility functions, and second we construct a framework based on the cumulative prospect theory that incorporates...

While a lot of research concentrates on the respective merits of VaR and TCE, which are the two most classic risk indicators used by financial institutions, little has been written on the equivalence between such indicators. Further, TCE, despite its merits, may not be the most accurate...

In this paper, we study various ways of changing probability measures with applications to Finance and Insurance. Changes of numéraire and Esscher transforms are considered, just as pricing kernels which are, in a complementary direction, a means of keeping a privileged probability measure....

The calculation of Net Asset Values and Solvency Capital Requirements in a Solvency 2 context - and the derivation of sensitivity analyses with respect to the main financial and actuarial risk drivers - is a complex procedure at the level of a real company, where it is illusory to be able to...

This article constructs a recovery-based framework for computing the credit Solvency Capital Requirements of insurers under the constant position paradigm. Although this framework is most suited under the Solvency 2 regulation, it also provides concepts that can be useful under the Basel...