Life Insurance Risk Management Essentials

1. Front Matter

   Pages I-XXI

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2. What is Risk Management

   • Michael Koller

   Pages 1-14

3. The Role of the Balance Sheets and of Capital

   • Michael Koller

   Pages 15-46

4. Accounting Principles

   • Michael Koller

   Pages 47-64

5. Risk Appetite and Tolerance

   • Michael Koller

   Pages 65-83

6. Key Insurance Processes and Their Risks

   • Michael Koller

   Pages 85-95

7. Financial Risks and Their Modelling

   • Michael Koller

   Pages 97-122

8. Insurance Risks

   • Michael Koller

   Pages 123-145

9. Operational Risks

   • Michael Koller

   Pages 147-168

10. Capital Models and Integrated Risk Management

    • Michael Koller

    Pages 169-173

11. Risk Adjusted Performance Metrics

    • Michael Koller

    Pages 175-187

12. Risk Management in a Group and Intra-group Transactions

    • Michael Koller

    Pages 189-196

13. Products and Their Risks

    • Michael Koller

    Pages 197-222

14. Emerging Risks

    • Michael Koller

    Pages 223-226

15. Regulatory View on Risk Management: Solvency II

    • Michael Koller

    Pages 227-242

16. Governance and Organisation

    • Michael Koller

    Pages 243-260

17. Stochastic Processes

    • Michael Koller

    Pages 261-270

18. Application of the Markov Model to Life Insurance

    • Michael Koller

    Pages 271-276

19. Abstract Valuation

    • Michael Koller

    Pages 277-296

20. An Introduction to Arbitrage Free Pricing

    • Michael Koller

    Pages 297-311

The aim of the book is to provide an overview of risk management in life insurance companies. The focus is twofold: (1) to provide a broad view of the different topics needed for risk management and (2) to provide the necessary tools and techniques to concretely apply them in practice. Much emphasis has been put into the presentation of the book so that it presents the theory in a simple but sound manner. The first chapters deal with valuation concepts which are defined and analysed, the emphasis is on understanding the risks in corresponding assets and liabilities such as bonds, shares and also insurance liabilities. In the following chapters risk appetite and key insurance processes and their risks are presented and analysed. This more general treatment is followed by chapters describing asset risks, insurance risks and operational risks - the application of models and reporting of the corresponding risks is central. Next, the risks of insurance companies and of special insurance products are looked at. The aim is to show the intrinsic risks in some particular products and the way they can be analysed. The book finishes with emerging risks and risk management from a regulatory point of view, the standard model of Solvency II and the Swiss Solvency Test are analysed and explained. The book has several mathematical appendices which deal with the basic mathematical tools, e.g. probability theory, stochastic processes, Markov chains and a stochastic life insurance model based on Markov chains. Moreover, the appendices look at the mathematical formulation of abstract valuation concepts such as replicating portfolios, state space deflators, arbitrage free pricing and the valuation of unit linked products with guarantees. The various concepts in the book are supported by tables and figures.

• Insurance mathematics
• Market consistent valuation
• Risk Management
• insurance

• , Mathematics Department, ETH Zurich, Zurich, Switzerland

  Michael Koller

Prof. Dr. Michael Koller, ETH Zürich, Switzerland

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