The European Union’s Solvency II Directive includes a solvency capital requirement (SCR) that defines how much capital insurers must hold. Introduced to reduce the risk that insurers would be unable to fully meet claims, Solvency II requires insurers to account for their exposure to market risk as well as the value-at-risk (VaR) of their holdings.
As one of the largest financial institutions in Poland and the largest insurance group in Central and Eastern Europe, PZU Group has developed a market risk model in MATLAB® to meet Solvency II requirements and manage risk more effectively.
“We need to know where our risks are, and the standard formula for the solvency capital requirement does not give us all the answers,” says Adam Nowicki, expert coordinator in the department of risk management at PZU. “The internal market risk model we developed in MATLAB not only supports compliance with the principles of the Solvency II Directive, it also provides valuable insights about our market risk situation.”