Driven by the Solvency II regulatory regime, EU insurance companies are required to minimize their risk of insolvency by ensuring that they have enough capital.
But can they use management actions (e.g., dynamic portfolio actions) to reduce their actual capital requirement?
Determining the answer to this question demands the exploration of different types (both direct and indirect) of management actions. We’ll examine these actions in this article, we proudly produced in association with GARP, using a case study to model an insurance product with a guarantee element related to market risk.
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