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    Capital Adequacy: Risk Acceptable - Not Acceptable - Probability of Failure Maximum Loss Acceptable (Catastrophic)

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    Muzammil Hassan
    The document discusses capital adequacy requirements for insurance companies. It outlines regulatory requirements to determine an appropriate level of capital based on a company's risk appetite and exposure. Insurance companies must hold a minimum capital requirement (MCR) set by regulators, but some believe this is insufficient and companies should determine their own individual capital assessment (ICA). The document also discusses ways for companies to maintain adequate capital levels above regulatory minimums, such as issuing new shares or debt. It notes upcoming Solvency II directives will fundamentally review capital adequacy standards.

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    Capital Adequacy: Risk Acceptable - Not Acceptable - Probability of Failure Maximum Loss Acceptable (Catastrophic)

    Uploaded by

    Muzammil Hassan
    21 views4 pages
    The document discusses capital adequacy requirements for insurance companies. It outlines regulatory requirements to determine an appropriate level of capital based on a company's risk appetite and exposure. Insurance companies must hold a minimum capital requirement (MCR) set by regulators, but some believe this is insufficient and companies should determine their own individual capital assessment (ICA). The document also discusses ways for companies to maintain adequate capital levels above regulatory minimums, such as issuing new shares or debt. It notes upcoming Solvency II directives will fundamentally review capital adequacy standards.

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    Chapter 5.1 Capital Adequacy

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    The document discusses capital adequacy requirements for insurance companies. It outlines regulatory requirements to determine an appropriate level of capital based on a company's risk appetite and exposure. Insurance companies must hold a minimum capital requirement (MCR) set by regulators, but some believe this is insufficient and companies should determine their own individual capital assessment (ICA). The document also discusses ways for companies to maintain adequate capital levels above regulatory minimums, such as issuing new shares or debt. It notes upcoming Solvency II directives will fundamentally review capital adequacy standards.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    21 views4 pages

    Capital Adequacy: Risk Acceptable - Not Acceptable - Probability of Failure Maximum Loss Acceptable (Catastrophic)

    Uploaded by

    Muzammil Hassan
    The document discusses capital adequacy requirements for insurance companies. It outlines regulatory requirements to determine an appropriate level of capital based on a company's risk appetite and exposure. Insurance companies must hold a minimum capital requirement (MCR) set by regulators, but some believe this is insufficient and companies should determine their own individual capital assessment (ICA). The document also discusses ways for companies to maintain adequate capital levels above regulatory minimums, such as issuing new shares or debt. It notes upcoming Solvency II directives will fundamentally review capital adequacy standards.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 4

    CAPITAL ADEQUACY

    Overriding regulatory requirements Board of an Insurance Co. responsibility to determine Co.s risk appetite Risk acceptable not acceptable probability of failure Maximum loss acceptable (catastrophic) FSA requires probability of failure ( one chance / 200 ) Risk appetite statement says criteria investment policy reinsurance policy Appropriate level of capital to hold risk base capital

    Minimum capital requirement (MCR), base capital resources requirement higher of a flat monetary figure premium based and claims based 15% - 25% of gross premium written Solvency ll directives risk base replacement for solvency l, FSA believes that MCR is insufficient Adequate having regard to the size and nature of the business Insurer to determine capital resources requirement (CRR) individual capital assessment (ICA) Calculating the ICA encourages management to take responsibility of its own business not externally exposed

    Major sources of risk include credit risk, market risk, liquidity risk, operational risk, insurance risk, concentration risk, residual risk, business risk, interest rate risk

    MAINTAINING CAPITAL ADEQUACY


    Monitor the adequacy, in excess of the regulatory requirement, no violation Issue new shares Issue long term debt Switching out of assets which are not allowed Reducing the business Purchasing reinsurance

    SOLVENCY LL
    Fundamental review of the capital adequacy Effective risk management process Demonstrate adequate financial resource Demonstrate adequate system of governance Supervisory review process Public disclosure and regulatory reporting Roll of actuary non life should also hire indispensable to an adequate system of governance Implementation on 2012 ICA, ECR enable the FSA to give ICG to firms if appropriate Recommended a capital requirement for a particular firm

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