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Assessing economic risk
by Madeleine Coetzee - Friday, 31 May 2013, 11:02 AM
 

As South Africa struggles with an unstable Rand, creeping inflation and below average economic growth it becomes more and more difficult to predict the future.  Risk is after all defined as being the difference between what actually happens and what is expected to happen and therefore greater in uncertain times.  Although sometimes the actual is better than expected, so risk can possibly be positive, not just negative.  This month’s CPD course article on Economic Capital Modeling looks at the professional opinions and responses of 43 of the largest global insurers regarding Economic Capital Modeling, including; modeling techniques; lite modeling approaches; and management understanding.  Economic capital is considered the amount of risk capital assessed on a realistic basis, which a firm requires to consider the risks to its going concern such as market risk, credit risk and operational risk.  It is the value required to secure solvency and liquidity to survive the worst case scenario, based on market rather than book values.  Very relevant in today’s turbulent times!

Features course: Economic Capital Modeling

CPD hours: 1.5 CPD hours

Editor: Prof Caryn Maitland

 


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