Capital requirements and claims recovery: A new perspective on solvency regulation

IF 2.1 3区 经济学 Q2 BUSINESS, FINANCE Journal of Risk and Insurance Pub Date : 2022-10-08 DOI:10.1111/jori.12405
Cosimo Munari, Stefan Weber, Lutz Wilhelmy
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Abstract

Protection of creditors is a key objective of financial regulation. Where the protection needs are high, that is, in banking and insurance, regulatory solvency requirements are an instrument to prevent that creditors incur losses on their claims. The current regulatory requirements based on value at risk (V@R) and average value at risk (AV@R) limit the probability of default of financial institutions, but they fail to control the size of recovery on creditors' claims in the case of default. We resolve this failure by developing a novel risk measure, recovery V@R. Our conceptual approach is flexible and allows the construction of general recovery risk measures for various risk management purposes. We provide detailed case studies and applications. We show that recovery risk measures can be used for performance-based management of business divisions of firms and discuss how to calibrate recovery risk measures to historical regulatory standards. Finally, we analyze how recovery risk measures react to the joint distributions of assets and liabilities on firms' balance sheets and compare the corresponding capital requirements with the current regulatory benchmarks based on V@R and AV@R.

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资本要求与索赔回收:偿付能力监管的新视角
保护债权人是金融监管的一个关键目标。在保护需求较高的情况下,即在银行业和保险业,监管偿付能力要求是防止债权人在索赔中遭受损失的一种手段。基于风险值(V@R)和平均风险值的现行监管要求(AV@R)限制了金融机构违约的可能性,但在违约的情况下,它们未能控制债权人索赔的回收规模。我们通过开发一种新的风险度量方法——恢复V@R来解决这一失败。我们的概念方法是灵活的,允许构建用于各种风险管理目的的一般恢复风险措施。我们提供详细的案例研究和应用程序。我们展示了恢复风险度量可以用于企业业务部门的绩效管理,并讨论了如何根据历史监管标准校准恢复风险度量。最后,我们分析了回收风险指标对企业资产负债表上资产和负债的联合分配的反应,并将相应的资本要求与基于V@R和AV@R.
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来源期刊
CiteScore
3.50
自引率
15.80%
发文量
43
期刊介绍: The Journal of Risk and Insurance (JRI) is the premier outlet for theoretical and empirical research on the topics of insurance economics and risk management. Research in the JRI informs practice, policy-making, and regulation in insurance markets as well as corporate and household risk management. JRI is the flagship journal for the American Risk and Insurance Association, and is currently indexed by the American Economic Association’s Economic Literature Index, RePEc, the Social Sciences Citation Index, and others. Issues of the Journal of Risk and Insurance, from volume one to volume 82 (2015), are available online through JSTOR . Recent issues of JRI are available through Wiley Online Library. In addition to the research areas of traditional strength for the JRI, the editorial team highlights below specific areas for special focus in the near term, due to their current relevance for the field.
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Issue Information: Journal of Risk and Insurance 12/2024 Membership Benefits The role of government versus private sector provision of insurance The economics of emerging insurance technologies: Theory and early evidence The effect of subsidized flood insurance on real estate markets
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