G. Castellani, C. D. Mottura, L. Passalacqua
Motivated by the possibility of a systemic crisis in the quality of sovereign credit standings, we investigate the effects of a systemic component in default correlations for typical Italian life insurance segregated fund portfolios, comparing with a more traditional approach where such component is absent. The systemic effects are modelled with a multidimensional Marshall-Olkin model, that – in addition – allows to describe possible segmentation effects of the market. In particular, we compare the valuation of the Solvency Capital Requirement in the Solvency II framework under the classical CreditRisk+ approach and the Marshall-Olkin model.
Solvency II, life insurance, sovereign default risk, systemic risk, Marshall-Olkin
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