The ESG conundrum

The move to using economic capital by insurers has gone hand-in-hand with the development of economic scenario generators (ESG)- and as these increase in sophistication, so do their uses. Life & Pensions reports on how this development is impacting on insurers

The introduction of risk-based solvency regimes and the consequent increase in the importance of economic capital calculations has occurred at a rapid pace - a trend that will only magnify as the deadline for Solvency II looms closer. But the step change in insurance company culture has been mirrored by the development of one of the tools which underpin this process - economic scenario generators (ESGs).

From the early days of ESGs, when a black box which was supplied - and calibrated - by