Читать книгу Pricing Insurance Risk - Stephen J. Mildenhall - Страница 38

In this section, we describe different ways to classify risk. Here, we are talking about classifying generic types of risk in the abstract, not about classifying insureds in the sense of rating class plans. It is generally not productive to dwell excessively on abstract risk classifications, but it is useful to be aware of them and to establish a common vocabulary.

The US Risk Based Capital framework for Property/Casualty insurers classifies risks into the following categories Obersteadt (2017):

 R0: Asset risk—subsidiary insurers

 R1: Asset risk—fixed income

 R2: Asset risk—equity

 R3: Credit risk

 R4: Underwriting risk—reserves

 R5: Underwriting risk—premium

 RCAT: Catastrophe risk (earthquake and hurricane).

The European Solvency II Standard Formula for the Solvency Capital Requirement classifies risks as:

 Underwriting risk, including premium, reserve, and catastrophe risk

 Default (counterparty) risk, including diversified and nondiversified counterparties

 Market risk, including interest rate, equity, real estate, spread, currency, concentration, and illiquidity risks

 Operational risk.

Some Enterprise Risk Management frameworks categorize risks as:

 Health and safety risks

 Reputational risks

 Operational risks

 Strategic risks

 Compliance risks

 Financial risks.

Insurance-focused ERM lists may add:

 Asset risk

 Credit risk

 Market risk

 Underwriting risk

 Reserving risk

 Catastrophe risk.

This book focuses on pure underwriting, reserving, and catastrophe risks. For property-casualty insurance, the others tend to be background risks that are hard to distinguish between units and therefore not relevant to pricing.

The next three sections categorize risk according to the following dimensions:

 Diversifiable (idiosyncratic) vs. systematic (including catastrophe)

 Systemic vs. nonsystemic

 Objective vs. subjective probability and uncertainty.