This research paper discusses the credit risk premium adjustment required for constructing discount rates specified by the IFRS 17 accounting rules. Calculating the credit risk premium is a key requirement in the ‘top down' yield curve method. It may also be a useful input in computing (or benchmarking) the illiquidity premium for ‘bottom up' discount rate construction.
An emerging business requirement for North American insurers is the ability to project forward stochastic reserve and capital requirements under various planning scenarios to a specific future date. In this paper we consider applying proxy functions to this task, using function fitting techniques described in our previous research paper Fitting Proxy Functions for Conditional Tail Expectation: Comparison of Methods.
Performance optimization through business insight, dealing with IFRS 17 in a post-Solvency II world, and the challenges associated with stress testing for insurance firms in the US. These were the focus areas for Moody's Analytics at this year's Moody's Insurance Summits in London and New York.
In this paper Brian Robinson discusses the challenges and way forward for a common projection capability which supports simplified processes, and delivers consistent business insight across functions, and the entire business.
This paper details alternative methods for fitting proxy functions to CTE, employing quantile regression in combination with OLS among other techniques. We compare methods according to quality of fit for an example portfolio of variable annuities.
In this article, we propose an innovative algorithm that is well suited to building dynamic models for credit and market risk metrics, consistent with regulatory requirements around stress testing, forecasting, and IFRS 9.
In this paper, we have considered the use of proxy models as a way of overcoming some of the operational and computational challenges associated with measuring future solvency under different market conditions and ALM assumptions.
In this paper, we review and make recommendations on the use of economic scenarios in the CECL process along six key dimensions: FASB requirements, Forecast methodology and horizon definition, number of scenarios, mean reversions and custom scenarios. We conclude with a discussion of other considerations banks and lenders should bear in mind when developing a forward-looking process for CECL compliance.
In this article, we consider some possible long-term ramifications of ride-sharing for the broader auto indust
In this paper, we show a practical application to forecasting capital requirements for real portfolios of participating whole life and annuity business, carried out in a joint research project between Moody's Analytics and New York Life Insurance Company.
Financial institutions are seeking ways to gain a better understanding of their credit portfolios' risk dynamics, allowing them to foresee and to prepare for potential increases in capital requirements resulting from economic shocks.
Aubrey Clayton, Xuan Liang
This paper demonstrates a two-step methodology for forecasting and stress-testing market risk instruments with explicit links to stressed macro scenarios.