What — and when — is a 1:200 event?

(Nov 12, 2015)

The concept of a "one in two hundred" (1:200) event over a one-year time horizon is well established as a reserving standard for insurance in several territories: the ICA in the United Kingdom, the SST in Switzerland and the forthcoming Solvency II standard for the entire European Union.  The basic idea is simple: insurers must be capitalised to withstand 99.5% of events which could arise over the coming year.  Other territories use concepts like conditional tail expectations.

There is room for debate as to what constitutes a 1:200 event, however.  For example, Figure 1 shows the elevated mortality caused by the 1918 influenza pandemic, which for many people would be a starting point for calibrating a modern…

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Tags: Spanish influenza pandemic, mortality shocks, longevity shocks, Solvency II, ICA, SST, VaR, value-at-risk

The weaker sex

(Jul 13, 2010)

Last year Iain wrote about a smooth model to identify mortality shocks, using Swedish population data to illustrate the impact of the 1918 influenza pandemic.  The ratio of male mortality rates in 1918 to those in 1917 is shown in Figure 1.

Figure 1. Ratio of mortality rates in 1918 to mortality rates in 1917. Source: own calculations using Swedish population data (males only) from the Human Mortality Database.

Excess mortality in 1918

From a Solvency II perspective, Figure 1 is uncomfortable for a life insurer with a mixed portfolio of life assurance and annuity risks.  There is huge excess mortality at the term-assurance ages 25-45, but little excess mortality at pensioner ages 60 and over.  This means that a term-assurance portfolio…

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Tags: Spanish influenza pandemic, mortality shocks, Solvency II

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