Identifying the priority methodology for reinsurer default risk assessment

Abstract

The summarised methodologies for reinsurer default risk include such type of approaches as assessment of the impact of stress factors, individual models of risk assessment, capital adequacy assessment to cover risk, rating assessment, and evaluation by means of indicators of sustainability. The technology of identifying the priority methodology for reinsurer default risk assessment is improved. It is based on an integrated approach and covers selection criteria: based on public data; no need to involve additional experts for evaluation; simplicity of calculation and interpretation of assessment results; accuracy of calculation; no need to use special software for evaluation. It was determined that the methodology for reinsurer default risk assessment in an insurance company using solvency assessment tools according to EU requirements of Solvency II is a priority. The influence of the reinsurer default risk on the level of solvency of insurance companies (with the example of Ukraine) is determined. It was found that the capital requirement for counterparty default risk (SCRdef ) has the highest solvency burden. The results obtained are of practical value and can be used by insurance companies to monitor the reinsurer default risk.