Economic Capital Calculation
and Allocation (ECCA) Minutes
Capital Calculation and Allocation (ECCA) Subgroup
C-3 Phase II
If the proposed requirements are adopted, required capital for variable annuities with guarantees will be based on an economic-capital-type model of a company’s liabilities. Using a subset of the 10,000 scenarios posted on the Academy’s website, insurance companies will be asked to develop stochastic scenario analyses and determine risk-based capital based on the average of the worst 10% of outcomes (“CTE 90”). Consistent with this proposed methodology for required capital, reserves for variable annuities will be based on the average of the worst 35% of outcomes (“CTE 65”).
A May 5th conference call will be held to solicit feedback on these proposals. This is an AAA sponsored call.
Fitch Capital Charges
Farewell For Now
The ECCA Specialty Guide and its annotated bibliography were great achievements and give readers a very accurate picture of the state of the art. While readers and subgroup members are clamoring for more guidance on practical applications, we are not yet able to identify sufficient sources of “best practices” to share. It appears that too many people are still trying to find their way, and not yet ready to lead.
We will re-evaluate the situation in 12-18 months, with respect to updating the bibliography as well as taking on new projects.