Jean-François Walhin, Belgium

In this paper we analyze the diversification benefit. We draw attention to the model and parameter risks which may have a very important influence on the calculation of the required solvency level of a financial conglomerate. We also comment on value creation for a financial conglomerate and show that it may be justified to write business with negative margins. The very simple numerical applications used in the paper exemplify why discussions between financial conglomerates and regulators should be very detailed in order to achieve a transparent compromise on the internal models that insurance companies will develop in the future to assess their solvency.
Date: 1 June - Time: 8:30 to 10:30 - Room: 251
Theme: 1.A. Stochastic dependence