Capital allocation based on the Tail Covariance Premium Adjusted

The current Solvency II process makes risk capital allocation to different business lines more and more important. This paper considers two business lines with the exponential loss distributions linked by a Farlie-Gumbel-Morgenstern (FGM) copula, modelling the dependence between them. As an allocation principle we use the Tail Covariance Premium Adjusted and obtain expressions for the allocation to the two business lines.