Economic capital and capital allocaton modeling

The International Association of Insurance Supervisors, of which Canada is a member, has recently introduced the notions of Enterprise Risk Management (ERM) and Own Risk and Solvency Assessment (ORSA), as two key components of its regulatory reform. Loosely speaking, the ERM identifies, measures and monitors insurer risks while the ORSA manages them. The main differences between the new regulation and its predecessors is perhaps the level and soundness of the quantitative methods involved as well as the extent of their integration in top-tier decision making. According to the Canadian Office of the Superintendent of Financial Institutions the new regulation applies to all federally regulated life and property and casualty insurers in Canada, and it must be implemented starting from 2014. This project aims to assist Sun Life Financial to build, implement and validate a quantitatively sophisticated state-of-the-art probabilistic model of its risk portfolio, to measure the riskiness implied by this risk portfolio and to effectively manage portfolio's risk components on a continuous basis. The project thereby suggests ways to mitigate the insolvency risk of Sun Life Financial, and it thereforecontributes to the stability of Canada's insurance market as a whole.

Yisub Kye
Superviseur universitaire: 
Dr. Edward Furman
Project Year: