Inui Kouji    Department   Undergraduate School  , School of Interdisciplinary Mathematical Sciences    Position   Professor
Date	2011/11/05
Presentation Theme	Market-consistent valuation of insurance liabilities with special emphasis on illiquidity risk premium and insurance ALM in Japanese context
Conference	日本保険・年金リスク学会第９回大会
Presentation Type	Speech (General)
Contribution Type	Collaborative
Publisher and common publisher	TANAKA, Shyuji
Details	Solvency II QIS5 documents issued by CEIOPS recently pointed out the importance of considering the liquidity (risk) premium (hereafter LP) on marketconsistent valuation of insurance liability. In this study, we adopt ALM procedure to explore whether LP works also in Japanese case in the same manner as CEIOPS indicated. First, we estimate interest rate term structure from JGB, swap rate, and corporate bond data by usual way, and point out possible difficulty arising in LP adjustment procedures described in CEIOPS(2010a) by the idiosyncrasies of Japanese interest rate. Next we compare LP estimates from the distribution of liability market-consistent value generated by Monte-Carlo simulation, estimate possible LP model for Japanese case, and evaluate surplus shortfall risk with historical/Monte-Carlo simulation. Our aim is to make clear the problems in existing method for LP estimation and explore implications of illiquidity risk, together with interest risk and credit risk, under extreme situations.