A Study on Measuring Aggregate Auto Insurance Risk with Stochastic Loss Model (자동차보험의 확률론적 통합보험리스크 실증분석)

조용운; 조재린

A Study on Measuring Aggregate Auto Insurance Risk with Stochastic Loss Model

Journal of Insurance and Finance
2012, 23(1), pp.59-100
Publisher : Korea Insurance Research Institute
Research Area : Social Science > Business Management

조용운 ¹, 조재린 ¹

¹보험연구원

Accredited

ABSTRACT

This paper measures risks(TVaR) for three auto insurance coverages -individual, non-individual liabilities, and others - depending upon the guidelines of the Korea Financial Supervisory Service(FSS). To do this,we use Heckman and Meyers CRM with a dataset containing insurance policies and claim settlements of 9 auto insurance companies. In addition,we measure an aggregated risks of all coverages using Heckman and Meyers CRM. We show that at the industry level, aggregated risks of all coverages amount to 839.3 billion KRW with the guidelines of the FSS. FSS requires to linearly add the risks for the three insurance coverages in measuring aggregated risks. However, the aggregated risks of the Heckman and Meyers CRM are measured to 822.1 billion KRW, down by 17.2 billion KRW in risks, as a result of a diversification effect. As such, We suggest our method in measuring aggregated risks of all coverages as insurers' optimal level of capital may be lower than the regulatory capital requirements required by the FSS.

KEYWORDS

CRM (collective risk model), RCM (risk capital multiplier), diversification effect, regulatory capital requirements

Citation status

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