A Study of the Risk-Based Capital for Life Insurance -interest rate and foreign exchange derivatives
Date Issued
2006
Date
2006
Author(s)
Cheng, Pei-Wen
DOI
zh-TW
Abstract
Due to the No. 34 Financial Accounting Statement, the derivatives start to be reported and hedge accounting is practiced. The RBC system conveying the risk borne by insurers has not considered the risk related to derivatives yet. Proposing the methods to calculate the required capital becomes urgent. However, the character of customization for derivatives results in various conditions different from case to case. This makes the fixed coefficients improper. For this reason, this study creates a formula and calculating process to determine individual risk, general market risk and counterparty risk of derivative products. The required capital can be settled according to actual holding positions of each insurance company. The focus is on the derivatives of foreign exchange rate and interest rate which account for the insurers’ books most.
Furthermore, Basel regulation is referenced and a few examples are presented as illustrations. Insurance companies can utilize this article and its examples to figure out the required capital.
Subjects
壽險業
風險資本額
衍生性商品
34號公報
RBC
Accounting Standard No.34
Type
thesis
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