Description: This article speculates on the presence and magnitude of the benefits attributable to regular rebalancing of one's investment portfolio. It surveys the extant literature, discusses certain implications, and presents conclusions.

Description: S&P Global released its initial version of proposed changes regarding its Insurer Risk-Based Capital Adequacy methodology and assumptions on Dec. 6th, 2021. Unlike prior guidance notes or criteria releases, the proposed changes comprehensively updated the current S&P rating criteria released in 2010. These updates would directly impact many insurers. S&P Global anticipates that 10 percent of existing ratings in the insurance sector would be impacted and the change would lead to more positive rating implications than negative impact. This article focuses on the proposed changes on the S&P risk-based capital (RBC) vs. the current model, then simulate impacts to a representative U.S. life insurer through an illustrative case study.

Description: The implementation of the IFRS 17 insurance accounting standard has brought significant changes to the financial reporting landscape of insurance companies. With new disclosure requirements and altered profit analysis, understanding and interpreting future profitability have become a topic of concern for the industry. While stability remains a key objective for insurance companies, the earning patterns might become more volatile especially when the contractual service margin (CSM) is exhausted, and a loss component (LC) needs to be established. Reinsurance, a common risk mitigation tool, can play a pivotal role in managing earnings volatility and minimizing losses for onerous measurement units. In this article, we propose a new key performance indicator (KPI) called “loss recoverability” to assess the performance of reinsurance treaties in achieving these objectives. We explain how this KPI can be utilized in multiple scenarios to evaluate the effectiveness of reinsurance strategies and pursue stability in earning patterns.

Description: This article argues that using Economic Capital as a metric does not capture all of the risks. The author suggests an alternative that better meets a corporation's overall risk management needs. This is value-based ERM, which is an approach that makes the quantification of enterprise value central to all aspects of the ERM process. It is a combination of two techniques—enterprise risk management and value-based management, and it captures all of the risks in a single metric.