Abstract
The aim of this paper is to introduce a complex econometric model of cash-flows of life insurers operating in the Czech market, which is also suitable in a prognosis framework. Namely, various economic-actuarial links among given insurance variables, e.g. the acquisition and administrative expenses, the technical reserves or the insurance premiums, are captured by means of a dynamic econometric system of linear simultaneous equations.
The considered model estimated via the three-stage least squares method (3SLS) is fully statistically verified. Therefore, it offers several useful interpretations and applications.
In particular, one can deal with analysis of anticipations of possible future developments from the actuarial point of view. Generally, results for particular generated scenarios (deterministic or random) can be taken into account by life insurance companies, e.g. in their internal calculations or for financial planning purposes, or by an insurance regulator, e.g. for stress testing presented by Solvency II.
Moreover, randomly generated scenarios are capable of delivering different empirical probabilities corresponding to any prediction horizon.