A. N. Hitchcox, I. A. Hinder, A. M. Kaufman, T. J. Maynard, A. D. Smith, M. G. White
Capital and cost of capital form a bridge between the insurance firm and the financial markets. The term capital is used in various ways. In current parlance, economic capital is frequently used to mean capital calculated using a risk-based measure which is independent of the regulatory requirements. In this paper we discuss the concept of target capital, where the firm takes account of three different approaches to risk appetite: regulatory capital plus a buffer; rating agency views; and the views of shareho…
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