The Benefits of Economic Capital Modeling
Would you like to see your company’s financial future? How successful will you be in one, two or even ten years? What if you could test a number of different actions ahead of time to determine what is the best course of action?
You can, with an Economic Capital Model (ECM).
Economic Capital Modeling uses a probability-based scenario generator to estimate the future financial results of an insurance organization. Detailed information about an insurer’s operations is entered into a modeling package and the package produces alternative versions of the insurer’s financial statements for prospective years. Alternate scenarios can be input to compare results to an unaltered base case. Key risks modeled in an ECM include underwriting risk, reserve risk, liquidity risk, natural catastrophe risk, asset risk, reinsurance credit risk and operational risk.
Huggins Actuarial Services employs industry-leading professionals with extensive knowledge and experience in economic capital modeling. Unlike the black box alternatives, Huggins’ model delivers clearer and deeper insights so our clients can make business-critical decisions with confidence. We can provide over 180 customizable reports that can be tailored to the needs of each organization.
An increasing number of insurers are using ECM’s for forecasting and to enable them to optimize their financial performance. Having the ability to “test drive” a decision in their company’s ECM before implementing gives them a better understanding of the expected results, as well as a range of possible outcomes.