Coming Together: Capital and Risk Management

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Successful capital management requires an integrated picture of a firm’s capital needs and funding possibilities, and an effective process for managing capital allocation to individual business units.

This article, part of our ongoing series on embedding ERM in insurance, analyzes the capital management function’s roles and responsibilities.

Key capital management topics covered:

• Determining capital requirements
• Monitoring and managing the capital position
• Managing the fungibility of capital
• Funding the capital position
• Optimizing capital efficiency

With the increased use of economic capital measures, the roles of the capital management and risk management functions will become closely linked. As part of this integrated approach, these functions can collaborate to ensure their firm’s risk/return balance is aligned with its strategic management goals and risk preferences.