Capital to do what?
Document ID: 2008-211
Published on: 30th June 2008
The last five years has borne witness to a fundamental and global shift in approach to the assessment of capital requirements for insurance groups, both for regulatory and internal management purposes. Traditional, prescriptive, actuarial formula-based approaches have given way to principle-based approaches that empower firms to use internal risk management models to assess their own particular risks. This trend has been seen in many of the world’s largest insurance markets. In Europe, the UK’s FSA was one of the first regulatory regimes to fully embrace principle-based reserving. The Solvency II process will roll out a similarly principle-based regime across the European Union over the next few years. In North America, the Academy of Actuaries’ Principle-Based Approaches pursues a similar agenda for US insurance regulation. And South Africa recently implemented a sophisticated principle-based regulatory capital regime for its insurance sector.
