Survey of Economic Capital Modelling Practices in the Bermuda Insurance Market (December 2008)

Summary

This is a BMA report summarising the results of a 2008 survey of economic capital modelling practices among Bermuda insurers and reinsurers. It is an informational and observational document, not a rule or guidance instrument, and it does not itself impose new legal or regulatory requirements. It describes how participating companies measure, allocate and manage capital, and sets out the Authority's observations on modelling limitations and approval considerations.

• Scope of survey: Covers capital measurement and allocation, catastrophe risk modelling, underwriting and reserving risk, market and credit risk, model data and structure, risk measures, documentation and review, dependency structures and diversification, validation and controls, model usage, group versus legal entity approaches, operational risk, and emerging risks.
• Participants: Thirty Bermuda based insurers and reinsurers (listed in the participant roster) completed the survey, including major commercial (re)insurers such as ACE, Arch, Aspen, Axis, Catlin, Everest Re, Hannover Re, RenaissanceRe, Validus and XL Capital.
• BMA response section: The report includes a section on the Authority's views on modelling limitations and on approval guidelines for internal capital models, reflecting the Authority's supervisory perspective at the time rather than binding rules.
• Appendices: Detailed appendices cover the Bermuda Solvency Capital Requirement (BSCR), catastrophe modelling for property business, vendor catastrophe models, dependency structure modelling, and the full aggregated survey questions and responses.

Because this is a survey report describing market practice and Authority observations circa 2008, it does not create ongoing compliance obligations for insurers; readers should treat it as background and context rather than a source of binding requirements.

Applies to

insurers, reinsurers