• No results found

Capital requirements for health insurance under Solvency II

N/A
N/A
Protected

Academic year: 2021

Share "Capital requirements for health insurance under Solvency II"

Copied!
23
0
0

Loading.... (view fulltext now)

Full text

(1)

Capital requirements for

health insurance under

Solvency II

Medical Expense Insurance: Actuarial Aspects and Solvency

Afternoon Seminar at the AG Insurance Chair in Health Insurance, KU Leuven

(2)

Pillar 2: qualitative requirements and

supervision

1. Enhanced governance, internal control, risk management and own risk

and solvency assessment (ORSA)

2. Strengthened supervisory review, harmonised supervisory standards and

practices

Pillar 3: prudential reporting and public

disclosure

1. Common supervisory reporting

2. Public disclosure of the financial condition and

solvency report (market discipline through

transparency)

Pillar 1: quantitative requirements

1. Harmonised calculation of technical provisions 2. "Prudent person" approach

to investments instead of current quantitative

restrictions

3. Two capital requirements: the Solvency Capital Requirement (SCR) and the Minimum Capital Requirement

(MCR)

Group supervision & cross-sectoral convergence

Groups are recognised as an economic entity => supervision on a consolidated basis

(diversification benefits, group risks)

(3)

SCR standard formula

Modules of the SCR standard formula

• Non-life underwriting risk • Life underwriting risk

• Health underwriting risk • Market risk

• Counterparty default risk

"The health underwriting risk module shall reflect the risk arising from the underwriting of health insurance obligations, whether it is pursued on a similar basis to that of life insurance or not, following both from the perils covered and the process used in the conduct of business."

(4)

Definition and segmentation of health

insurance

Heterogeneity of the European health insurance market

• 27 different social systems and insurance traditions • substitutive, supplementary or complementary

• large variety of medical services covered • long-term or short term

• covering expenses or paying lump sums

• special features like premiums adjustments, risk equalisation …

Health Task Force in 2010

• Members: supervisors, industry representatives, actuaries • Worked on

– definition

– segmentation

(5)

Definition and segmentation of health

insurance

Health insurance covers one or both of the following:

Workers' compensation insurance (WC) = health insurance

relating to accidents at work, industrial injury and occupational disease.

The provision of medical treatment or care including preventive or curative medical treatment or care due to illness, accident,

disability or infirmity, or financial compensation for such treatment or care

Financial compensation for illness, accident, disability or infirmity Medical expense insurance (ME) Income protection insurance (IP)

(6)

Definition and segmentation of health

insurance

Non-life insurance obligations (NSLT Health)

* excluding WC

Life insurance obligations (SLT Health)

ME insurance * IP insurance * WC insurance ME prop. reinsurance * IP prop. reinsurance * WC prop. reinsurance Health nprop. reinsurance Health insurance Health reinsurance Annuities

(7)
(8)

Health underwriting risk module

Health

NSLT Health SLT Health CAT

Premium & Reserve Lapse Mortality Lapse Longevity Expense Morbidity/ Disability Revision Mass accident Accident concentration Pandemic

(9)

NSLT Health risk sub-module

Premium and reserve risk

𝑆𝐶𝑅𝑝𝑟 = 3 ∙ 𝜎 ∙ 𝑉 standard deviation of annual losses, normalised by volume measure volume measure V = Vprem+Vres multiplication by 3 corresponds to slightly skewed distribution of annual losses

(10)

NSLT Health risk sub-module

Calibration of standard deviations

• Non-life and NSLT health calibration controversial since QIS2 – poor empirical justification

• For QIS5 larger calibration exercise of CEIOPS

• But data base and calibration methodology remain controversial

• 2010/2011 EIOPA Joint Working Group on Calibration

– Chaired by Peter ter Berg (Dutch National Bank)

– Involves supervisors, industry representatives and actuaries

• Mid-2011: new calibration proposal for non-life and NSLT health

(11)

NSLT Health risk sub-module

Data basis

• Content of data sets:

– Earned premiums – Claims triangles

– Ultimate loss estimates – Expenses

• Gross/net of reinsurance; including/excluding CAT losses

• About 2700 data sets from insurers of 26 EEA member states

(12)

NSLT Health risk sub-module

Insurers BE Insurers Countries Medical expenses 269 6 25 Income protection 381 6 24 Workers' compensation 51 5 16 NP reinsurance 8 - 6

(13)

NSLT Health risk sub-module

Data limitations and data cleaning

• Automatic filters for data anomalies – manual correction or exclusion of data

• Length of data series: min 3 years, confirmed by sensitivity analysis

• Insurers' data excluding CAT only usable for property insurance – for other LoB manual removal of isolated peaks

• Data with outlying residuals removed

• Mainly use of data gross of reinsurance because sample of net data significantly smaller

(14)

NSLT Health risk sub-module

Estimation process

Step 1: Estimation of standard deviation per insurer

Step 2: Modelling of size-dependent standard deviation

(15)

NSLT Health risk sub-module

Step 1: Estimation of standard derivation per insurer

Premium risk:

• Standard estimator applied to time series of combined ratios

Reserve risk:

• Standard estimator applied to time series of run-off ratios

• Mean squared error of prediction (MSEP) Merz/Wüthrich: "Modelling The Claims

(16)
(17)

NSLT Health risk sub-module

Step 2: Modelling of size-dependent standard deviation Premium risk:

• Variance proportional to premiums or squared premiums or a mixture of both

• Lognormal distribution of annual loss • Maximum likelihood estimation

Reserve risk:

• Run-off ratios – same model as for premium risk with best estimate as volume measure

• MSEP – two approaches:

– Variance proportional to squared best estimate; least squares fitting

(18)

NSLT Health risk sub-module

Step 3: Correction for sample bias

Size bias of sample

• Larger insurers may be overrepresented in the sample

• Use of size distribution of QIS5 participants plus correction for missing small participants

National market bias

• Some national markets may be better represented in the sample than others

• Average of country standard deviations, weighted with country market size

(19)

Example: Medical expense insurance – premium risk

NSLT Health risk sub-module

(20)

NSLT Health risk sub-module

Step 3: Choice of relevant insurer size for calibration

• How many insurers should be below/above the relevant size?

• How many policyholders should belong to insurers below/above the relevant size?

• Median insurer size, but not more than 95% of

policyholders should belong to insurers larger than the

relevant size.

(21)

NSLT Health risk sub-module

Results

Premium risk Reserve risk

QIS5 new QIS5 new Medical expenses 4% 5% 10% 5% Income protection 8.5% 9% 14% 14% Workers' compensation 5.5% 8% 11% 11% NP reinsurance 17% 17% 20% 20%

(22)

NSLT Health risk sub-module

Impact assessment

More details about the calibration on EIOPA's website:

"Calibration of the Premium and Reserve Risk Factors in the Standard Formula of Solvency II" Change in SCR Medical expenses +5% Income protection ±0% Workers' compensation +15% NP reinsurance ±0%

(23)

Solvency Capital Requirement

The SCR standard formula is not the last word!

• Recognition of health risk equalisation systems • Undertaking-specific parameters

– Premium and reserve risk – Revision risk

• Partial and full internal models • Capital add-ons

References

Related documents

They would also be required to provide stubs for other common shell features (scripting, command-line editing, and job control), and perhaps provide an implementation of one of

Conditional sentences are claims to a deductive inference, which means that the assertion of a conditional contains the implicit claim that the antecedent (or

A label can be inserted using the Label box (e.g. Vin), but has nothing to do with the function of the pin. The pin's function relates to the connection specified in the

The polygenic risk score (PRS) o ff ers a calculation of genetic risk for a disease or a trait based not solely on genome-wide signi fi cant SNPs, but on all nominally associated

AACSB: Reflective Thinking Bloom's: Comprehension Learning Objective: Retrospectives Level:

bisque fire An initial firing of raw clay ware to burn out physical water, chemical water, and carbonaceous matter, and make the clay into a material that will not slake down in

 SCR often dominated by insurance risk and (financial) market risk  Investment decisions can change the solvency II ratio instantaneously.  New solvency regulation will impact

Prudence margin Solvency I Solvency II Book Value of assets Technical Provisions Free Surplus Solvency I Economic Value of liabilities Solvency II SCR Free Surplus Book Value of