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Caroline Franziska Siegel
Former Member
Title
Dr.
Last Name
Siegel
First name
Caroline Franziska
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1 - 10 of 17
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PublicationBasel III versus Solvency II: An Analysis of Regulatory Consistency under the New Capital StandardsThis article provides a critical analysis of the consistency of the standard approaches for market and credit risks under Solvency II and the current and forthcoming Basel III standards. The comparability is assessed both theoretically via a detailed comparison of the capital standards and in a numerical analysis that contrasts the capital charges for a stylized portfolio. Our examination reveals substantial discrepancies in the design of the frameworks. These lead to vastly differing capital requirements for the same risks. Moreover, the analysis indicates higher charges for banks than insurers, especially under the proposed new Basel III standard approaches.Type: journal articleJournal: The journal of risk & insuranceVolume: 84Issue: 4DOI: 10.1111/jori.12154
Scopus© Citations 10 -
PublicationType: journal articleJournal: Journal of Risk and InsuranceVolume: 81Issue: 1
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PublicationSolvency Assessment for Insurance Groups in the United States and Europe : a Comparison of Regulatory FrameworksAs a reaction to the increasing trend of insurers forming and participating in financial conglomerates and insurance groups, insurance supervisory authorities are currently developing group-wide solvency regulations. The International Association of Insurance Supervisors (IAIS) recently published an issues paper that discusses the challenges to group supervision and defines criteria for a thorough group solvency framework. Based on these criteria, this article provides an overview and comparison of three important approaches - the U.S. solo plus approach of the National Association of Insurance Commissioners, Switzerland's group structure model, and the Solvency II proposal on group solvency assessment. The analysis reveals various deficits within the group regulation of the United States implying the need for future regulatory work. By contrast, the performance of the European frameworks with regard to the IAIS criteria is good. In particular, the Swiss framework can be seen as a prime example of an innovative and solid group solvency assessment.Type: journal articleJournal: Geneva Papers on Risk and Insurance - Issues and PracticeVolume: 38Issue: 02DOI: 10.1057/gpp.2013.3
Scopus© Citations 4 -
PublicationRegulating Insurance Groups : A Comparison of Risk-Based Solvency ModelsSince the 1990s, there has been extensive growth of financial groups involved in the insurance sector. As a result, supervisors and regulators are currently developing group-wide capital standards intended to enable effective monitoring of the financial soundness of such groups. Some jurisdictions are taking steps towards a consolidated approach, which views the group as one single integrated entity, while others model the group as a collection of interrelated but separate legal entities. This paper provides a theoretical as well as a numerical comparison of these two approaches to group-wide solvency assessment in light of the different regulatory issues and challenges associated with consideration of group effects. As a benchmark case, we consider a "silo approach" that is based on a solo assessment of the risks and solvency capital requirements of each legal entity within the insurance group. Our analysis contributes to the ongoing discussion about the best way to conduct group-wide solvency assessments.Type: journal articleJournal: Journal of Financial PerspectivesVolume: 1Issue: 2
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PublicationThe Risk of Model Misspecification and its Impact on Solvency Measurement in the Insurance SectorBased on a basic solvency model, the authors examine the sensitivity of different risk measures with respect to model misspecification. An analysis considers the effects of introducing stochastic jumps and linear, as well as non-linear dependencies into the basic setting on the solvency capital requirements, shortfall probability and expected policyholder deficit. Additionally, the authors take a regulatory view and consider the degree to which the deviations in risk measures, due to the different model specifications, can be diminished by means of requiring interim financial reports. The simulation results suggest that the sensitivity of solvency capital as a risk measure - as it is in regulatory practice - underestimates the actual misspecification risk that policyholders are exposed to. It is also found that semi-annual mandatory interim reports can already reduce the model uncertainty faced by a regulator, significantly. This has important implications for the design of risk-based capital standards and the implementation of internal solvency models. The results from the Monte Carlo simulation show that changes in the specification of a solvency model have a much greater impact on shortfall probabilities and expected policyholder deficits than they have on capital requirements. The shortfall risk measures react much more sensitively to small changes in the model assumptions, than the capital requirements. This leads us to the conclusion that regulators should not solely rely on capital requirements to monitor the solvency situation of an insurer, but should additionally consider shortfall risk measures. More precisely, an analysis of model risk focusing on the sensitivity of capital requirements will typically underestimate the relevant risk of model misspecification from a policyholder's perspective. Finally, the simulation results suggest that mandatory interim reports on the solvency and financial situation of an insurance company are a powerful tool in order to reduce the model uncertainty faced by regulators.Type: journal articleJournal: The Journal of Risk FinanceVolume: 13Issue: 4
Scopus© Citations 8 -
PublicationType: case study
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PublicationBasel Accords versus Solvency II: Regulatory Adequacy and Consistency under the Postcrisis Capital Standards, Presentation at the 2014 Annual Meeting of the American Risk and Insurance Association (ARIA) (Seattle, USA)( 2014-08-05)
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PublicationEssays on Risk-Based Capital Standards, Group Regulation, and the Measurement of Model Uncertainty in the Insurance IndustryDuring the last decade, the financial industry has faced several financial crises. Insurance supervisors have reacted by revising the existing regulatory frameworks as well as developing and implementing new solvency models. The economic research of the challenges to the insurance industry arising from these new regulatory systems is therefore an important and contemporary task. This doctoral thesis, which comprises four research papers, seeks to gain new insights into the field of regulation and the solvency assessment of insurance companies. The first paper "The Impact of Private Equity on a Life Insurer's Capital Charges under Solvency II and the Swiss Solvency Test" is an empirical analysis of the performance of the asset class private equity regarding both its risk-return profile and its impact on an insurer's capital requirements under the Solvency II framework of the European Union as well as Switzerland's Solvency Test. We review the standard market risk models and also propose an approach for an internal model. We show that although the risk-return profile of private equity suggests a solid performance in relation to various other asset classes, the standard approaches of Solvency II and the Swiss Solvency Test overly penalize the asset class in terms of capital requirements. The following two research papers pertain to the area of solvency assessment for insurance groups. The paper "Solvency Assessment for Insurance Groups in the United States and Europe - a Comparison of Regulatory Frameworks" is an overview and comparison of three innovative group solvency frameworks: the National Association of Insurance Commissioners approach of the United States, the group structure model of Switzerland, and the Solvency II proposal on group solvency assessment. This comparison is based on the recently established criteria for a thorough group solvency approach of the International Association of Insurance Supervisors' Issues Paper on Group-Wide Solvency Assessment and Supervision (see IAIS, 2009b). Our analysis reveals a superiority of the European frameworks over the U.S. approach. In particular, the Swiss model is able to satisfy most of the reference criteria in full. The third part of the dissertation contains the paper "Regulating Insurance Groups: a Comparison of Risk-Based Solvency Models". Here, two general classes of group solvency approaches are displayed and compared: the class of legal entity approaches and the class of consolidated approaches. Regarding the challenges of regulatory inconsistency and risk interdependencies, we conduct a theoretical as well as numerical analysis studying shortfall risks and capital requirements under both approaches. Our findings show that a pure consolidated focus is likely to underestimate shortfall risks in times of financial crises, whereas an approach relying on the legal entity viewpoint generally makes it possible to display different group structures but cannot control regulatory arbitrage. Finally, the last research paper of this dissertation is called "Model Uncertainty and Its Impact on Solvency Measurement in Property-Liability Insurance". It constitutes a study of the model risk immanent in solvency models for property-liability insurers. Based on a basic framework, we analyze the effects of including stochastic jumps, linear, and nonlinear dependencies in a solvency model on shortfall risks as well as the Solvency II capital charges. In addition, we take a regulatory viewpoint, examining the possibility of reducing the deviations in risk measures - that are due to the different model specifications - by requiring interim financial reports. Our simulation results suggest that the sensitivity of capital charges as a risk measure are likely to underestimate the actual model risk to which policyholders are exposed to. Furthermore, we find that mandatory interim reports are able to significantly reduce model uncertainty. To sum up, the standard approaches of U.S. and European solvency frameworks need additional reforms. Further development of the standard solvency models may be necessary in terms of assessing nonlinear risk dependencies, harmonizing the national capital requirements, and reducing model uncertainty. Although, from an academic perspective, the European frameworks seem superior to the current U.S. approach, they might need to partially reconsider their implicit incentive scheme. In this context, the thesis uncovers an inappropriate treatment of alternative investments in terms of capital charges under the standard market risk models of the SST and Solvency II. This can have severe economic implications such as an underrepresentation of certain asset classes that could otherwise be well suited for diversifying an insurer's asset portfolio.Type: doctoral thesisVolume: 1Issue: 4046
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PublicationType: newspaper articleJournal: I.VW Management InformationIssue: xxx
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PublicationRegulatory Capital and Asset Management in Life Insurance - The Case of Private Equity(Institut für Versicherungswirtschaft (St. Gallen), 2012-02-27)