Economic Capital
Moody’s Analytics insurance economic capital solution helps insurers calculate economic capital, using a one-year, Value-at-Risk (VaR) approach to perform capital allocation by product and risk category. The solution also offers critical insights that help evaluate solvency positions and support risk-based decision making.
Economic capital is increasingly being used by insurance companies to inform their internal views of available and required capital. The Moody’s Analytics solution addresses the business needs and production requirements associated with economic capital calculations and associated what-if analysis.
Our insurance economic capital solution provides the data management, calculation, and analytics to support decision making. This scalable, enterprise-wide offering enables users to manage capital modeling processes in a multi-user/multi-site environment. The engine for the one-year VaR capital calculations, developed around a Monte Carlo approach, is the capital aggregation module. Key inputs include proxy models for both assets and liabilities and one-year VaR risk scenarios for market and non-market risks.
Risk scenario generation enables insurers to project relevant risk drivers over a one-year time horizon. Proxy modeling reduces an insurer’s reliance on full asset liability management cash flow models for applications such as interim valuation, capital calculations, or hedge effectiveness.
Business Reporting and Analytics
Our Insurance economic capital solution supports a wide range of solvency and risk-based metrics to feed into business and regulatory market indices and support risk-based decision making. Its analytics include smoothed and unsmoothed VaR metrics, capital attribution, and diversification analysis. It also supports a broad range of what-if analysis including stress testing; using deterministic scenarios such as the impact of market stress; alternative portfolio analysis; and asset allocation.
Featured Experts
Aubrey Clayton
Economic Scenario Generation expert; model efficiency specialist
Cristian deRitis
Leading economist; recognized authority and commentator on personal finance and credit, U.S. housing, economic trends and policy implications; innovator in econometric and credit modeling techniques.
David Fihrer
Skilled life insurance actuary; subject matter expert on IFRS 17 and source of earnings
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