| CODE | INS3400 | ||||||||||||
| TITLE | Elements of Capital Modelling and Planning for Insurers | ||||||||||||
| UM LEVEL | 03 - Years 2, 3, 4 in Modular Undergraduate Course | ||||||||||||
| MQF LEVEL | 6 | ||||||||||||
| ECTS CREDITS | 4 | ||||||||||||
| DEPARTMENT | Insurance and Risk Management | ||||||||||||
| DESCRIPTION | This study-unit provides students with an introduction to the different sources of capital and to capital management tools available for an insurance undertaking (incl. capital tiering): Together with an adequate understanding of a risk-based capital (RBC) requirement quantification and allocation regime, such as that required under the Solvency II Delegated Act. Moreover, it will equip students with knowledge of capital models which can be used by both life and non-life insurers to asses Minimum and Solvency capital requirements and in their respective and strategic business planning. The mathematical content of the topic will be kept to a minimum, with the emphasis being the interpretation of the need for Capital for an insurance undertaking and the understanding of a capital models’ output and structure for the purposes of a risk manager and/or accountant partaking in an ORSA process/ drawing up of the SFCR. Study-Unit Aims: The study-unit is oriented at equipping students with the technical knowledge and practical skills required to evaluate an undertaking's risk capital requirements and obtain an understanding of the respective quantification methodology and the different sources of capital that can be used to cover it. Further insights into capital modeling such as stochastic risk modelling, with some applications in Excel and possibly R, will also be provided. This study-unit is particularly aimed at students wishing to further their studies risk management or actuarial science, and/or pursue careers within an undertaking’s risk management function, regulatory and compliance function and actuarial roles. This study-unit may also be of particular interest to students wishing to specialise in accountancy/financial management and assurance roles within the insurance industry. Learning Outcomes: 1. Knowledge & Understanding: By the end of the study-unit the student will be able to: - Identify and differentiate between different sources of Capital and capital instruments available for an undertaking and their respective attributes. - Identify the need for and define the basic functionality of a capital model - Define and describe the nature of the basic risk-capital charges and structure of a capital model (risk capital charges) and the main drivers of the constituent risk capital charges, including basic correlation and risk diversification benefits. - Explain the basic principles of capital budgeting and planning and the (Own Risk and Solvency Assessment) ORSA process. - Explain the role of actuaries and risk-managers in constructing, calibrating and assessing the adequacy of capital models. 2. Skills: By the end of the study-unit the student will be able to: 1) Evaluate the following approaches to capital modelling: - Deterministic models - Stochastic models. - Standard-formula based approaches vs. (partial) internal models. 2) Describe approaches to the assessment of capital requirements for the following risk types: - Insurance risk - Market risk - Credit risk - Operational risk - Liquidity risk Main Text/s and any supplementary readings: Main Texts: Study material will be provided for the entire course content. Supplementary Readings: - Buckham D., Wahl J. and Rose S. (2012) - An Executive's Guide to Solvency II, Wiley. - Sweeting P.(2011) - Financial Enterprise Risk Management, Cambridge University Press. - Rees M.(2018) - Principles of Financial Modelling Model Design and Best Practices using Excel and VBA, Wiley. |
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| STUDY-UNIT TYPE | Lecture | ||||||||||||
| METHOD OF ASSESSMENT |
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| LECTURER/S | Matthew Attard |
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The University makes every effort to ensure that the published Courses Plans, Programmes of Study and Study-Unit information are complete and up-to-date at the time of publication. The University reserves the right to make changes in case errors are detected after publication.
The availability of optional units may be subject to timetabling constraints. Units not attracting a sufficient number of registrations may be withdrawn without notice. It should be noted that all the information in the description above applies to study-units available during the academic year 2024/5. It may be subject to change in subsequent years. |
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