The Influence of Seed Selection on the Solvency II Ratio

TL;DR

This paper demonstrates that the Solvency II ratio can significantly vary depending on the seed used for the RNG, highlighting the importance of RNG quality in risk management.

Contribution

It provides the first real-world example showing the impact of RNG seed selection on the Solvency II ratio and discusses RNG quality criteria for stable risk assessments.

Findings

Solvency II ratio varies with RNG seed

RNG quality affects risk management stability

Defines true randomness and quality tests for RNGs

Abstract

This article contains the first published example of a real economic balance sheet where the Solvency II ratio substantially depends on the seed selected for the random number generator (RNG) used. The theoretical background and the main quality criteria for RNGs are explained in detail. To serve as a gauge for RNGs, a definition of true randomness is given. Quality tests that RNGs should pass in order to generate stable results when used in risk management under Solvency II are described.