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Return on risk-adjusted capital under Solvency II : implications for the asset management of insurance companies

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      <subfield code="a">Braun, Alexander</subfield>
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      <subfield code="a">Return on risk-adjusted capital under Solvency II</subfield>
      <subfield code="b"> : implications for the asset management of insurance companies</subfield>
      <subfield code="c">Alexander Braun, Hato Schmeiser, Florian Schreiber</subfield>
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      <subfield code="a">We derive a European life insurer's return on risk-adjusted capital (RORAC) under the Solvency II capital requirements. To do so, we draw on historical time series data and construct a large number of asset allocations, taking into account current portfolio shares of the German life insurance industry. Subsequently, we determine expected profits and market risk capital charges by means of the standard formula. Our results indicate that the RORAC is mainly driven by the capital requirements, while the expected profits are almost irrelevant. Moreover, we show that less-diversifoed portfolios with high asset risk need to be backed by low capital buffers and therefore result in high RORAC values. Well-diversified portfolios with balanced risk-return profiles, on the other hand, involve higher capital charges and thus achieve low RORAC figures. Hence, under Solvency II, a RORAC-based performance measurement may have detrimental effects for a life insurer's stakeholders</subfield>
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      <subfield code="0">MAPA20080564254</subfield>
      <subfield code="a">Solvencia II</subfield>
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      <subfield code="0">MAPA20080590567</subfield>
      <subfield code="a">Empresas de seguros</subfield>
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      <subfield code="a">Gestión de activos</subfield>
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      <subfield code="a">Rentabilidad ajustada al riesgo</subfield>
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      <subfield code="a">Seguro de vida</subfield>
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      <subfield code="a">Requerimientos financieros</subfield>
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      <subfield code="a">Administración de la empresa de seguros</subfield>
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      <subfield code="a">Schmeiser, Hato</subfield>
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      <subfield code="w">MAP20077100215</subfield>
      <subfield code="t">Geneva papers on risk and insurance : issues and practice</subfield>
      <subfield code="d">Geneva : The Geneva Association, 1976-</subfield>
      <subfield code="x">1018-5895</subfield>
      <subfield code="g">02/07/2018 Volumen 43 Número 3 - julio 2018 , p. 456-472</subfield>
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