Title: Insurance portfolio risk minimization
Authors: Alexandra Dias - University of York (United Kingdom) [presenting]
Isaudin Ismail - University of Leicester (United Kingdom)
Aihua Zhang - University of Leicester (United Kingdom)
Abstract: The problem of risk minimization of an insurance portfolio from the insurer point of view is considered. We investigate the optimal proportion of different lines of business that minimize a chosen measure of risk. We use extreme value distributions and copulas in order to estimate the measure of risk tail value at risk. Tail value at risk is the measure chosen by Solvency II in order to estimate the solvency capital requirement (SCR) that insurers are required to hold in the European Union. Hence a strategy that minimizes the aggregated risk of the insurance portfolio composed of several lines of business reduces the SCR. We also take into account the use of reinsurance in our empirical study.