Insurers assess partial models to reflect risk profile

Partial internal models are likely to play an important role in many firms’ Solvency II capital calculations, as they look for ways to make the standard formula better reflect their risk profile. Blake Evans-Pritchard looks at how the models are being developed

Internal models

Some years ago, the Danish insurance industry came up against a problem. The Danish Society of Actuaries had spent a considerable amount of time and effort in developing mortality tables, which were approved by the Danish Financial Services Authority (FSA). It believed that the tables were accurate for the insurers and pension funds that would be using them.

The problem was that Solvency II has since taken a different view, which meant that Danish firms using the standard formula would have to

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