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.
