Solvency need resulting from reserving risk in a ORSA context (Q2282735)

The paper provides an internal model to evaluate the Solvency need resulting from the reserving risk of insurance companies with long maturity contracts. As part of the Solvency II insurance guidelines, the study focuses on the difference between the reserve and its mean (in continuous time). In order to quantify the reserving risk, the value at risk of this difference is considered, that is the Solvency need. After defining the reserve $R(h,S)$, its asymptotic behavior $(h\to +\infty)$ is studied. Then, the paper focuses on the evaluation of the Solvency need $SN(h)$, where h is the maximal duration of the insurance contracts; the study proves that the normalized reserve converges in distribution, as $h\to +\infty$, to the sum of a Gaussian RV and an independent RV which is an integral of a function of the systemic risk. In particular, in the case of mortgage guarantee, the non-Gaussian RV is considered and three numerical schemes to estimate $SN(h)$ when $h$ is large are proposed.