Modeling of capital investments

Overview

In 2008, the DAV's Investment Committee was established. Within this committee, there was a working group on capital market and investment modeling, which was divided into three sub-working groups: capital market modeling, investment modeling, and capital market-oriented valuation methods.

This document is the final report of the Investment Modeling Sub-Working Group, updated by the Solvency II Investment Aspects Working Group. It provides recommendations on how an insurance company's investment portfolio can be modeled. Depending on the modeling purpose, various approaches can be used. However, the principle of proportionality should be decisive for the accuracy and complexity of the modeling.

The following topics are addressed in this document: summarizing the broadly diversified investment portfolio across asset classes and risk factors, defining asset-side management rules (e.g., for reinvestment and asset allocation), considering accounting issues, and some specific issues (modeling funds, modeling credit risk). For all accounting issues, this document is limited to accounting according to the German Commercial Code (HGB) in its current 2020 version.