A stochastic model for capital requirement assessment for mortality and longevity risk, focusing on idiosyncratic and trend components

Abstract This paper provides a stochastic model, consistent with Solvency II and the Delegated Regulation, to quantify the capital requirement for demographic risk. In particular, we present a framework that models idiosyncratic and trend risks exploiting a risk theory approach in which results are obtained analytically. We apply the model to non-participating policies and quantify the Solvency Capital Requirement for the aforementioned risks in different time horizons.