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Risk Based Capital Covariance Project


Research Projects – Risk Management

The Risk Management Section is pleased to make available the results of a research project that explored the covariance and correlation among various insurance and non–insurance risks in the context of risk based capital. The project was particularly focused on the correlations of these risks under extreme conditions or as is sometimes termed "in the tail of the distribution." The research was conducted by Don Behan and Sam Cox of Georgia State University.

The first phase of the project was a literature review to determine what work has already been done in this area and might be beneficial for the project. The completed literature search, in bibliography form, can be found at the following link

The objective of the second phase of the project was the development of an educational model for actuaries on the use of copulas for simulation of extreme events. The model was programmed into an Excel workbook using a simulation add–in. The Excel workbook and accompanying documentation can be obtained from the links below.


RBC Covariance Bibliography

Example of a Constructed Copula

Procedure for Simulation with Constructed Copulas

Thank You

The Risk Management Section wishes to thank the following members of the Project Oversight Group for their contribution to this effort:

  • Thomas Conway
  • Richard Goldfarb
  • Larry Gorski
  • James Reiskytl
  • Max Rudolph
  • John Stark
  • Steve Siegel
  • Jeanne Nallon

Questions Or Comments?

If you have comments or questions, please send an email to