2010b). Solvency II and nested simulations - A Least-Squares Monte Carlo approach

Within the European Union, risk-based funding requirements for life in-surance companies are currently being revised as part of the Solvency II project. However, many insurers are struggling with the implementation, which is in part due to the inefficient methods underlying their numerical computations. We review these methods and propose a significantly faster approach for the calculation of the required risk capital based on least-squares regression and Monte Carlo simulations akin to the well-known Least-Squares Monte Carlo method for pricing non-European derivatives introduced by Longstaff and Schwartz (2001, [20])