Given the growing emergence of crypto-assets and their potential integration into life insurance savings products, this paper develops a risk-neutral Economic Scenario Generator (ESG) for bitcoin.

Based on a Heston model calibrated using bitcoin options, our ESG cleverly combines Milstein and Quadratic Exponential (QE) diffusion schemes to ensure trajectory stability while satisfying market-consistency and martingality tests.

Our methodology provides insurers with a robust tool for modeling bitcoin within the Solvency II framework, complementing our previous study that recommended an 84 % shock on bitcoin for SCR calculation under standard formula approach.

Life Insurance, Solvency II, Bitcoin, Crypto-assets, Calibration, Economic Scenario Generator.

In this new technical publication, Nexialog Consulting presents a rigorous methodology for constructing a risk-neutral Economic Scenario Generator (ESG) dedicated to Bitcoin.

Developed within the Solvency II regulatory context, this work offers a robust modeling framework that addresses the integration of crypto-assets into life insurance portfolios.

This research paper provides :

• A comprehensive calibration of the Heston stochastic volatility model based on Bitcoin option market data

• An in-depth analysis of two advanced discretization schemes - Milstein and Quadratic Exponential, for scenario stability over long-term horizons

• A modeling approach that meets both Market Consistency and Martingality regulatory tests

• A critical perspective on the limitations of traditional ESGs when applied to highly volatile assets such as cryptocurrencies

• Strategic insights into the use of crypto-assets in insurance Asset-Liability Management under Solvency II