FINANCIAL AND INSURRANCE RISK MANAGEMENT
The aim of the course is to analyze the financial and insurance risks as well as risk management tools, addressing solvency assessment issues, in the Solvency II environment. The focus is on the relationship between the risks undertaken by the insurance companies and the capital to meet insurance obligations towards policyholders and beneficiaries of insurance or reinsurance contracts. At the end of the course, the student will be able to: recognize the various risk factors, apply the most appropriate management methodology and identify the impact on capital.
Expected learning outcomes
Acquiring knowledge and understanding. The student must demonstrate•know the criteria for calculating the values and risk of financial contracts ("mark-to-market" and "mark-to-model") and the new quantities ("Solvency Capital Requirement") in the Solvency II logic.Applying knowledge and understanding. The student must demonstrate:•be able to apply quantitative methods and numerical algorithms for the evaluation of financial and insurance contracts, the processes for calculating the SCR and for the calculation of values and risk;•know and be able to use the relevant data bases for the management of typical insurance risks.Making informed judgments and choices: The student must demonstrate that he has developed a critical ability to integrate knowledge and make judgments, also on the basis of limited or incomplete information, on the criteria for calculating the values and risks of financial contracts, on the criteria for evaluating re-evaluable policies and more generally on the mathematical software object of the teaching.Communicating knowledge and understanding: The student must be able to answer the oral test questions in a clear and exhaustive way. It must be able to explain the techniques learned and used for the implementation of the application software object of the course.Capacities to continue learning: The student must be able to learn independently new knowledge in the topics covered in teaching and to integrate in them further correlated knowledge.
General knowledge and reasoning ability. Some basic knowledge of:mathematical probability (essential), stochastic processes (important), financial mathematics (essential), design of algorithms (important). For students lacking these prerequisites, an integration including a relevant bibliographic references will be provided.
In the context of teaching, the general principles for financial decisions under conditions of uncertainty are analyzed. The "mark-to-market" and "mark-to-model" valuation of financial contracts are analyzed. The technical characteristics of the re-evaluable policies are analyzed. Considering that the European directive on Solvency II - approved in November 2009 - requires refunding the logic of financial management and corporate governance insurance; we analyze the essential issues with respect to which the administrative organs of the enterprise are to take decisions, of which they must then reply to the Supervisory Authority. It is also noted that the choice of high information technology and a theory adapted to the principles of probability calculation can translate "healthy and prudent management" into operational rules of efficiency and good administration, for the conscious exercise of responsibilities. In this context, the use of DBMS for the management of data concerning financial applications is analyzed. We study numerical evaluation, development and analysis of algorithms using the R CRAN processing environment.
Main Topics foreseen in the teaching:"Mark-to-market" and "mark-to-model" valuation of financial contracts (3 h).Evaluation of revaluable policies (3 h).The main sizes of Solvency II (3 h).The measurement of the Solvency Capital Requirement (3 h).Use of databases (12 h).
The teaching activity will be divided into: a)Frontal lessons, b)Computer lab exercises, c)Individual and group reports and researches.
De Felice M., Moriconi F. (2011) Una nuova finanza d’impresa. Le imprese di assicurazione, Solvency II, le Autorità di vigilanza, Bologna, il Mulino (selezione di capitoli).Castellani, G., De Felice, M., Moriconi, F. (2005) Manuale di finanza II. Teoria del portafoglio e mercato azionario, Bologna, il Mulino.Castellani, G., De Felice, M., Moriconi, F. (2006) Manuale di finanza III. Modelli stocastici e contratti derivati, Bologna, il Mulino.Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II), Official Journal of the European Union, L335, 17.12.2009.Lecture notes
For all students (attending or non-attending) the assessment will be based on a practical test and an oral examination.