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Simulation-based capital models: testing, justifying and communicating choices. A report from the life aggregation and simulation techniques working party
British Actuarial Journal
The development of an economic capital model requires a decision to be made regarding how to aggregate capital requirements for the individual risk factors while taking into account the effects of diversification. Under the Individual Capital Adequacy Standards framework, UK life insurers have commonly adopted a correlation matrix approach due to its simplicity and ease in communication to the stakeholders involved, adjusting the result, where appropriate, to allow for non-linear interactions.doi:10.1017/s1357321717000071 fatcat:2kp46iyzbrddpfoo27i34wyw2q