Proxy modelling develops under Solvency II

One of the more radical requirements of Solvency II is full stochastic modelling, a process that is currently technologically beyond the reach of most insurers. Proxy modelling techniques have fast become a popular alternative. Clive Davidson reports


When it comes to internal models, Solvency II is a regime somewhat ahead of its time. The blunt truth is that for large complex liability portfolios, today’s technology is simply not up to the full stochastic modelling that the regime requires for internal model solvency capital calculations. It probably won’t be for a number of years. So, what is to be done?

Fortunately, human ingenuity is good at solving this kind of problem. There are many areas of endeavour where full detailed modelling

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