Rating agencies and regulators have increased their focus on Economic Capital Models of late, and this issue has also been generating a lot of discussion in insurance circles. While some may believe the value derived from Economic Capital Models is minimal, it is too late to ignore them now, as regulators and rating agencies are requiring them. The concern now is making sure these models are developed intelligently.
This session discussion will cover:
1. A high level discussion on Economic Capital Models:
o What is an Economic Capital model? How does it fit into ERM?
o A discussion of the rating agency models (Best and S&P) and the regulatory models (NAIC RBC, Bermuda, Solvency II)
o The view of the investment community (Do investors care if a company has an internally developed Economic Capital model? Do they care about BCAR or RBC measures? Do they even know what these mean?)
2. What do actuaries who work on Economic Capital models need to think about?
3. How can Economic Capital Models be used to manage a firm?