The Research On The One-year Reserve Risk Based On Coefficient Of Variation Model

Solvency II has brought great changes to the international insurance industry. Non-life insurance companies need to extract the outstanding claims reserve to deal with possible paid in the future. Accurate assessment of the reserve has great influence on the determination of performance, solvency and risk status of non-life insurance companies. In the past, ultimate reserve risk is based on long-term reserve adequacy and the overall risk of payment. But the Solvency II has been adjusted the measurement time range of reserve risk, the time range is one year, namely the one-year reserve risk, it primarily concerns the pay which may occur within the next year of the insurance company, the loss reserving should be sufficient to assume all risks of the year. So studying the one-year reserve risk is particularly important.This paper analyzed the one year reverse risk from the relationship between the view of ultimate reserving risk and one-year reserving, which discussed a method based on coefficient of variation model. The form of quantification for the reserve risk is the standard deviation and the data of analysis is from China Life Property & Casualty. This method is similar to Standard Formula, but the method differs from the Standard Formula in that it produces CVs that vary by year over the run-off period. The proposed method produces results that directly depend on the mix of Case O/S and IBNR, they is respectively set the corresponding coefficient of variation. Differencing of the variances between ultimate unpaid for two consecutive year-end valuations produces the one-year variance during the year. In addition, the method only through the Excel table can be achieved, simple operation. Through the analysis of examples, we can get standard deviation of one year reserve risk and technical provision in Solvency Ⅱ framework.