Economic capital blues

Rating agencies and life insurers have not always got on, with squabbles over how to account for diversification across business lines a prime reason. But could the rise of economic capital management put an end to the arguing?

June 27, 2005, and one of the world's largest insurers, Munich Re, is holding a risk management investors day meeting in London. The company's stakeholders listen intently as Munich Re's chairman of the board, Nikolaus von Bomhard, board member Jorg Schneider and Charlie Shamieh, head of central division integrated risk management, give a presentation outlining their position on economic capital. About a third of the way through comes the gripe about rating agencies. "Limited quantitative