Description: This article discusses a good way for insurance companies to calibrate economic capital (tail risk level) that is consistent with the market opinion on its risk. It also establishes a bridge between a risk neutral evaluation and a real world evaluation.

Description: This paper demonstrates the use of Quantile Regression in the development and understanding of conditional value at risk (VaR) models for enterprise risk management.

Description: 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. In addition, the paper introduces a technique for estimating capital adequacy that is based on mapping stochastic distributions of regulatory and rating agency capital measures to observable financial rating transition matrices.

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 author constructed the efficient frontier of new business sales by modeling the embedded value and economic capital against a universe of possible growth rates of the three lines of business in a typical three-year planning horizon. The ERM function can use the efficient frontier of new business to provide a more rigorous analysis of the impact of growth rates on the firm’s overall capital efficiency and value creation, hence forming a feedback loop with the businesses in the planning process to optimize the growth strategy.

Description: Abstract: A model for analyzing the probability and severity of default of sovereign entities and banks. The methodology analyzes the risks inherent in the investment of debt of sovereign governments and large financial institutions side-by-side, taking into consideration macroeconomic interactions among the sovereign fiscal and monetary authorities, the financial institutions, and the real economy. The signature aspect of the methodology is that it adapts a Merton-style default model to use explicit measures of sovereign assets and asset volatility.