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Economic capital in the limelight

Hubert Mueller (Towers Perrin, 175 Powder Forest Drive, Weatogue CT 06089‐9658, USA; tel: +1 860 843 7079; fax: +1 860 843 7001; e‐mail: hubert.mueller@towersperrin.com)
José Siberón (Standard & Poor’s Corporation, 55 Water Street, New York, 10041‐0003, USA; tel: +1 212 438 2000; e‐mail: jose_siberon@standardandpoors.com)

Journal of Financial Regulation and Compliance

ISSN: 1358-1988

Article publication date: 1 December 2004

Abstract

“Economic capital (EC) is in – Value at Risk (VaR) is out!” This statement by James Lam, well known to be the first Chief Risk Officer (CRO) worldwide, at the April 2004 Enterprise Risk Management (ERM) Symposium in Chicago, caused quite a reaction by the attendees. What is EC? Why are banks and insurance companies focused on calculating EC? What are the differences between EC and regulatory or rating agency capital? What are rating agencies’ views towards EC? This paper, summarising a panel on this topic, which was held at the ERM Symposium in Chicago in April of this year, attempts to answer these questions, focusing on the application of EC to life insurance companies.

Keywords

Citation

Mueller, H. and Siberón, J. (2004), "Economic capital in the limelight", Journal of Financial Regulation and Compliance, Vol. 12 No. 4, pp. 351-358. https://doi.org/10.1108/13581980410810894

Publisher

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Emerald Group Publishing Limited

Copyright © 2004, Emerald Group Publishing Limited