risks) Risks Included
All material risks for inforce business
All material risks for inforce business
All material risks (explicit components for asset default and market risk, mortality risk, morbidity risk, lapse risk, C3 risk, segregated fund guarantee risk, foreign exchange risk. No explicit component for operational risk – this is addressed implicitly via scale up to required MCCSR ratio
All material risks; operational risk not always included
Quantification Method
• Factor based for C0, C1, C2, and C4. Note that many of the factors were derived from stochastic modeling or a risk applied to a representative product type and/or average period
Stochastic Modeling
Factor based asset default and market risk with 50% lower factors for assets backing qualifying par business. Factor based C3, morbidity and foreign exchange risks. Deterministic model calculations for mortality and lapse risks. Stochastic modeling for segregated fund guarantee risk.
Stress testing currently most common, but stochastic modeling is gaining some ground
Correlation matrix applied to risk capital results for each risk or business unit
No diversification credit. Individual risk components are added together.
Correlation is most common, but structural model is gaining some ground
• • •
Stochastic modeling Stress testing Factor based
• Stochastic modeling for certain C3 risks
Aggregation Method • •
Additive Correlation matrix applied to risk capital results for each
Correlation matrix where correlation is either 0 or 1, but with an aggregate covariance adjustment.
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