Risk Management
Task Force

Economic Capital Calculation and Allocation Subgroup

 

Credit Risk Management | Economic Capital Calculation and Allocation
Enterprise Risk Management | Equity Modeling | Extreme Value Models
Health Risk Management | Policyholder Behavior in the Tail
Pricing for Risk | Risk Based Capital Covariance | Risk Management Metrics


Economic Capital Calculation and Allocation
Jenny Bowen, Leader
The subgroup has completed its initial goals and is not presently active. The discipline of ECCA is still too immature to find meaningful, dependable “best practices” to analyze and share in an effort to help actuaries bridge the gap between theory and practice. Perhaps by late 2005 there may be sufficient progress in this area to support a survey of practical applications and members are urged to continue to think about ways to continue this evolving practice.

Goals

  • to research comprehensive measurement of economic risk in life and health insurance companies
  • to document techniques and standards that quantify the material risks of life and health insurance companies
  • to document techniques for allocating economic capital for use in pricing, budgeting and financial reporting

Product and Process

  • The subgroup conducted a survey of company practices related to economic capital. The survey document below describes the results at a high level. Full details of the survey are provided in Appendix 2 below.
  • The subgroup has organized its findings into a Specialty Guide on Economic Capital. The document, attached below, is as of June 2003.

An extensive literature review was conducted. An annotated outline is incorporated as Appendix 3 to the Specialty Guide on Economic Capital.



Documents & Links (all files are in .pdf format unless otherwise indicated)

Work products: (all files are in .pdf format unless otherwise indicated)
EC Survey Presentation (October 2002)

The subgroup organized its findings into a Specialty Guide on Economic Capital. The document, attached below, is as of June 2003.
Specialty Guide V1.5
  Appendix 2   Appendix 3




Recent Meeting Minutes:
ECCA Minutes – April 23, 2004
ECCA Minutes – March 12, 2004
ECCA Minutes – February 13, 2004




ECCA Resources:

Review of “Distortion Risk Measures and Economic Capital
UK Working Party Report on Insurer Risk and Capital Assessment
IAA Report of Solvency Working Party
Allocation of Risk Capital in Financial Institutions

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