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Modeling ORSA scenarios at APG Group level

Chung, Wai Tun (2017) Modeling ORSA scenarios at APG Group level.

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Abstract:Recently, national supervisor DNB imposed APG at group level to an insurance regulation called Solvency II. As a consequence, APG has to submit an overarching group "Own Risk and Solvency Assessment" (ORSA) to the DNB. The ORSA is a risk management tool that insurance companies use to obtain a picture of their own risks and solvency requirements. At the heart of ORSA lies the scenario analysis. In this research, a model was developed that supports APG with its scenario analysis. The model acts as a layer on top of the model within the insurance business unit Loyalis. By using the model, APG is able to estimate the financial consequences of the ORSA scenarios. The assessment is in terms of both strategic and solvency KPIs that were defined in this research. The model is based on risk drivers. These drivers, formulated as a function of the KPIs, are the variables that are shocked for each scenario, ceteris paribus for the assumptions made in the model. The risk drivers can be altered by the model user, but preferably the altering is done by a group of experts knowledgeable of APG and the environment in which it operates in or by use of human swarming. The modeling of ORSA scenarios at APG Group level enhances both strategic and risk management. Scenario analysis can assess the robustness of the current strategy by testing whether or not the firms strategy can be maintained under adverse circumstances. From a risk perspective, modeling ORSA scenarios is useful because it enhances the firms ability to react to future risks, which makes the firms strategy more resilient. Thus, even though the solvency capital requirement of APG Group is somewhat irrelevant to compute due to APG's Group small contribution to the overall solvency capital requirement level, the ORSA modeling is meaningful for the above reasons.
Item Type:Essay (Master)
APG, Amsterdam Zuid, Nederland
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Industrial Engineering and Management MSc (60029)
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