ERM-705-12: P&C RAROC: A Catalyst for the Improved Capital Management in the Property and Casualty Insurance Industry


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Online Link to this Reading: http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.137.9640&rep=rep1&type=pdf

Key Takeaways:

  • DFA has been Slow to Respond
  • P&C RAROC as a Decision Support Tool
  • Economic Capital Defined
    • History of Economic Capital
    • Conceptual Framework
    • Implementation for P&C Insurers
  • RAROC Defined
    • RAROC for Insurance Activities
    • RAROC for Investment Activities
    • Comparing RAROC for the Hurdle Rate
  • Economic Capital and RAROC for the US P&C Industry
    • Objective and Methodology
    • Data and Approach
    • Results and Insights
  • P&C RAROC: The Way Forward