This version is superseded by version V2.0 (August 2013)
This Note has been developed by the IAA for insurers to support the Standards and Guidance materials developed by the International Association of Insurance Supervisors (IAIS) for supervisors. It draws on industry experience, supervisors’ supervisory practices, models and frameworks published by others and emphasizes practical considerations. The Note also seeks to help insurers assess risk framework maturity by reference to characteristics associated with different stages of development of risk management sophistication.
With the new risk-management evaluation process described in this paper, risk managment will become a separate, major category of S&P analyses. Best performers in that category will have robust risk-management processes that are carried across the entire enterprise.
At its most basic level Economic Capital can defined as sufficient surplus to cover potential losses, at a given risk tolerance level, over a specified time horizon. This is the working we will use throughout this Specialty Guide, adding details as needed for specific applications. We will also acquaint the reader with alternative definitions currently in use in the marketplace, based on a survey conducted in 2003.