CAS Risk Based Capital – Dependencies and Calibration Working Party—Initial Report
9. Mitigating Considerations Notwithstanding these observed gaps we note that regulatory capital management is only one element of a regulatory structure, and can play a greater or lesser role, depending on the overall structure of the system. Even if gaps exist, the significance can be mitigated by other regulatory activities. For example, the following regulatory mitigation strategies can apply: 1. Catastrophe Risk—Regulators can, independent of capital assessment, assess company reinsurance protection including reinstatement costs and reinsurance credit risk. 2. Credit for Reinsurance—Regulators can, independent of capital assessment, verify that reinsurance risk transfer is sufficient, supporting collateral is available if required, and provision has been for disputed reinsurance collections. 3. Company Size—Regulators can, independent of capital assessment, more closely supervise the company with respect to its risk approval through approval for limited lines of business, limited geography, oversight of management, rate adequacy, reinsurance arrangements, etc.
Casualty Actuarial Society E-Forum, Winter 2012-Volume 1
34