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Risk-Based Capital in General Insurance

Author

Listed:
  • Hooker, N.D.
  • Bulmer, J.R.
  • Cooper, S.M.
  • Green, P.A.G.
  • Hinton, P.H.

Abstract

This paper looks at the problems of assessing, for solvency purposes, the capital requirements of a non-life insurer in the context of the United Kingdom. It considers how these capital requirements might vary according to the different risks to which an insurer is subject and how this Risk-Based Capital (RBC) might be measured in practice, using as a case study the RBC formula recently introduced in the United States of America. The paper also discusses the application of RBC concepts to the problem of internal capital allocation, to assist in measuring an insurer's rate of return to shareholders by business unit, as well as the more obvious regulatory application. The advantages and disadvantages of a formula-based approach to capital requirements for solvency purposes are discussed in comparison with possible alternative approaches to insurance supervision.

Suggested Citation

  • Hooker, N.D. & Bulmer, J.R. & Cooper, S.M. & Green, P.A.G. & Hinton, P.H., 1996. "Risk-Based Capital in General Insurance," British Actuarial Journal, Cambridge University Press, vol. 2(2), pages 265-323, June.
    • Handle: RePEc:cup:bracjl:v:2:y:1996:i:02:p:265-323_00
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    Cited by:

    1. Kwon W. Jean, 2011. "History of Insurance, Market Development and Regulation in Seven Least Developed Countries in Asia: Afghanistan, Bangladesh, Bhutan, Cambodia, Laos, Myanmar and Nepal," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 5(1), pages 1-41, March.
    2. Savage, Lawrie, 1998. "Re-engineering insurance supervision," Policy Research Working Paper Series 2024, The World Bank.
    3. Kamel Mellahi & Adrian Wilkinson, 2008. "A Study Of The Association Between Downsizing And Innovation Determinants," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 12(04), pages 677-698.

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