Description: The SOA is pleased to make available a report updating the 2012 risk assessment performed by Porteous et al. The report also provided an economic capital analysis for a stylized US plan with the same member profile and the USS provisions modified to reflect a typical US DB plan.

Description: The article explores the use of economic capital modeling to deliver value to clients by improving the financial security of many individual lives around the world in a cost-effective way.

Description: Global financial crises like the one recently experienced, affected both large and small institutions.Today, when there is heightened need for enhanced risk management tools, some entities are unable to employ sophisticated mechanisms due to limited data availability. Moreover, from the Basel Committee on Banking Supervision’s point of view via Basel II and Basel III, the internal ratings- based (IRB) approach requires that institutions have some reliable estimates of default probabilities of default for each rating grade. Taking the work of previous researches a step further, this paper intends to propose a new dynamic mechanism to for the risk management industry for to calculateing probabilities of default (PD). Through these estimates for the core model, we generate implied probability of default (PD) through actuarial estimation tools and different probability distributions. This mechanism is specialized to work best for low- defa ult portfolios (LDPs). Furthermore, scenario testing is adopted to validate the model against any model- specific bias

Description: This paper develops an option pricing model that takes cost of capital concepts as its foundation rather than dynamic replication. The resulting model, called the 'C' measure in this paper, is related to the family of Affine Jump Diffusion models that are well known in the finance literature, so it is fairly easy to understand and implement. We argue that this is a reasonable model to use for estimating equity implied volatilities that are beyond the five- to 10-year horizon that can typically be observed in today‘s capital markets. The paper concludes with a short discussion of how to grade from observable market data to the 'C' measure.

Description: In this Chapter we present a novel way for estimating aggregated EC figures based on Bayesian copula estimation. Contrary to the classic approach of using a single inter-risk- correlation matrix we derive a probability distribution of possible correlation matrices that enables us to tackle the important issue of parameter uncertainty. Presented at 2010 Enterprise Risk Management Symposium, Society of Actuaries, April 12-15, 2010.

Description: Feature article discussing how insurers have reflected volatility in asset return assumptions when determining capital requirements, but have largely disregarded the impact of mortality volatility on their liability assumptions when performing stochastic analysis.

Description: This is a concluding and encompassing part of our research on the project entitled \Weighted Premium Calculation Principles and Risk Capital Allocations, which has been supported by the Actuarial Education and Research Fund AERF and the Society of Actuaries Committee on Knowledge Extension Research CKER. We explore the concept of weighted distributions and their role in various phenomena occurring in insurance and finance. In particular, we relate weighted distributions to actuarial and economic premium calculation principles, and also to the capital asset pricing model CAPM. Imitating the latter, we propose a weighted insurance pricing model WIPM. Although general in formulation, we show that the WIPM can successfully be evaluated in a variety of situations, which we illustrate with a number of examples.

Description: This paper is Part 1 of a two-part submission. Part 2, “An Alternative Approach to Capital Allocation,” discusses using risk-replicating techniques that directly calculate the cost of capital. Such techniques can be used as a substitute for capital allocation. This paper expands upon current capital analysis by introducing a practical approach that considers the objectives of all stakeholders of an insurance company in setting appropriate capital targets.

Description: The articles discusses how Principles-based approaches PBA to setting reserves and capital can be combined with Enterprise Risk Management to create a competitive advantage for an insurance company. Those companies can leverage these models by combining unique risks and strategies to measure and manage risk.

Description: Economic capital is an embedded part of the banking risk management and regulatory framework. The insurance industry has relied on rating agency and regulatory formulas that have been criticized as overcapitalizing and not appropriately differentiating risk drivers in the capital formulation. The emergence of C-3 Phase I and C-3 Phase II have introduced an economic approach to capital in the insurance industry. This half-day seminar takes a detailed look at the subject of economic capital. From the Record of the Society of Actuaries 2005, Volume 31, No. 1: 2005 New Orleans Life Spring Meeting, May 22-24, 2005, Session 9 Seminar.

Description: Panelists discuss economic capital, capital modeling, and hedge modeling, especially for guaranteed living benefits [GLBs] on variable annuities. Session 34PD of the 2005 Valuation Actuary Symposium.

Description: A number of insurance companies have recently implemented, or are in the process of implementing, economic risk capital. These programs are being implemented because of concerns with the existing regulatory and accounting frameworks and/or companies' desire to have a capital framework which is more consistent with their risk profile. From the Record of the Society of Actuaries, Volume 30, No. 2, Spring Meeting, San Antonio, TX, June 14-15, 2004, Session 47PD.

Description: This Specialty Guide is designed to be a source of information for practitioners interested in: learning more about the subject of Economic Capital - definition, uses, tie-in to RBC and calculations - finding out about current market practices in this area, and getting acquainted with available literature on this topic.

Description: This article presents recent developments and trends with respect to Economic Capital based on the work of the EC subgroup of the SOA's Risk Management Task Force.

Description: Panelists at this session of the SOA 2003 Washington, DC Spring Meeting explore economic capital from the standpoint of an SOA task force including an industry survey, one company's implementation, and a regulator.

Description: Actuaries and rating agencies increasingly believe that the NAIC's formulaic required capital standard does not adequately address a company's insurance, economic market and credit, reporting and pricing risk structure. Economic capital, based upon a stochastic evaluation of a company's total risk exposures, presents a new approach for accurately gauging a company's exposure to risk. Attendees learn what economic capital is, how it is calculated, what it tells company management about risk exposures and how it can serve as a valuable risk-adjusted measurement tool. From the Record of the Society of Actuaries, Volume 29, No. 1: Washington D.C. Spring Meeting, May 29–30, 2003, Session 24OF.