Insurers grapple with challenges of more granular credit risk models
Insurers are seeking greater granularity of data in modelling to help them assess credit risks more accurately. But increased granularity could lead to greater complexity in modelling, which might be more of a hindrance than a help. Clive Davidson reports
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Because insurers typically hold significant portfolios of credit assets against their liabilities, credit risk is a problem they cannot afford to ignore. Yet credit risk has always been a challenge to model. There is a wide range of approaches on offer, with little consensus as to the best methodologies.
In the wake of the financial crisis, credit spreads diverged between issuer sectors, such as bank and non-bank issuers, adding another layer of complexity to the
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