Department of Energy Engineering, Faculty of Energy Engineering and Industrial Management, University of Oradea, Universitatii st. 1, RO-485526 Oradea, Romania
Department of Social Sciences, Faculty of Economics, Agora University of Oradea, Piata Tineretului 8, RO-485526 Oradea, Romania; Deparatment of Mathematics and Informatics, Faculty of Exact Sciences, Aurel Vlaicu University of Arad, Elena Dragoi 2, RO-310330 Arad, Romania
The directive 2009/138/EC „Solvency II”, provides the determination of insurance capital requirements based either on a standard formula or an internal model built by the company and approved by the regulatory authority. The build of an internal model involves the determination of an extreme quantile from the empirical distribution of portfolio. An estimate of this quantile, with a 99.5% confidence level, requires a large number of simulations, each taking into account different scenarios as: insufficient reserves, unfavourable developments of financial assets, etc. The present paper proposes to argue the necessity of the extreme value theory approach in order to estimate the risk of loss for the insurance issue, in accordance with European Directive „Solvency II”, from the perspective of making prudent decisions for the assessment of insurance capital requirements.
Butaci, C., Dzitac, S., Dzitac, I., & Bologa, G. (2017). Prudent decisions to estimate the risk of loss in insurance. Technological and Economic Development of Economy, 23(2), 428-440. https://doi.org/10.3846/20294913.2017.1285365
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