We compare two different valuation models for assets and liabilitiesthat can be considered in the standard approach to solvency assessmentand in particular, in determining the required target capital. The firstmodel is suggested by a joint working party by members in CEA, Comit´eEurop´een des Assurances, and is based on the duration concept and thesecond one is based on ideas from Arbitrage Pricing Theory (APT). Anapplication of these valuation approaches to two specific insurance contractsone from life insurance and another from vehicle insurance showsthat, among other things, the duration-based approach to solvency assessmentsuggests larger target capital requirement than the one based onAPT.
2005. Vol. 5, 377-400 p.