US focus: Economic evolution
US insurers do not have the same incentives as their European counterparts to model capital on an economic basis, but more are choosing to do so. Blake Evans-Pritchard reports on what is driving this trend
Many insurance companies in Europe are already highly familiar with sophisticated economic capital modelling. The way the Solvency II framework has been structured means that, if a company can demonstrate it has a good command of its internal risks, it may be entitled to lower capital requirements. The same incentives for better economic risk capital management do not apply in the US.
“While there are companies in the US looking to develop a second generation of economic capital models, many are
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