Insurance proxy modelling: the weight of success
Proxy modelling techniques have proved useful for insurers wanting to model ever greater numbers of risks. Clive Davidson reviews how they have fared so far
The desire to better understand risk across the balance sheet, plus the requirements of regulations such as Solvency II and International Financial Reporting Standards accounting standards, have in recent years driven insurers to explore the use of proxy techniques for modelling their assets and liabilities. Getting the proxies, such as replicating portfolios and polynomial functions, to work and satisfactorily replicate a full modelling run was the first target. Embedding them in the firm’s
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