Modelling Financial Risks for Egyptian Insurance Market. Evidence from Insurance Investment Channels

Abstract

Recently, there has been renewed interest in modelling risks especially in insurance market, there has been substantial research undertaken on the importance of copula in financial risk management field. This study aim to estimate risk measures Value-at-Risk (VaR) and Expected Shortfall (ES) based on the dependence structure between investment channels (Government bonds, Securities available for trade, Securities available for sale and Securities held to maturity) by using elliptical Gaussian copula on data collected from Egyptian insurance market from 2007/2008 to 2018/2019. The principal finding of this research is to measure the financial risk according to the copula estimation. The findings of this paper illustrate that the copula parameter ρ is simmilar to the parameter in the whole market, that is because the life insurance sector has long term conrtacts while the nonlife sector has short term contracts. Moreover, VaR and CVaR in all sectors are equevlint that reflects the stability in insurance sector.

Keywords

• copula
• dependence structure
• var
• es