Thesis (MBA (Business Management))--Stellenbosch University, 2008. / ENGLISH ABSTRACT: There are conflicting aims among the various stakeholders of a business. Shareholders
wish to maximise their return on capital, whereas debt holders and customers wish to
minimise the risk to capital. This conflict has led to the emergence of economic capital.
Financial services companies, such as insurers, manage risk on behalf of their
customers and at the same time make profits for the shareholders of the business. A
company that employs economic capital analysis will strike a balance between too
much capital, which can lead to an excessive cost of insurance, or not enough capital,
which can lead to an unacceptable risk of insolvency.
Sound financial management is required to manage the capital resources of the
business. The aim on the part of management is to calculate an economic capital
requirement for the business that can absorb any financial shocks or losses and provide
the flexibility needed to continue with day·to·day operations. The issue is therefore
whether to assess the amount of capital required based on a statutory view of solvency,
or an "economic" (fair value) view of solvency. The statutory view of solvency is the
capital adequacy requirement (CAR) as described by the Financial Services Board
(FSB). CAR provides the insurer with an approximately 95% confidence in its ability to
meet its obligations as they fall. More companies are moving towards an economic
capital approach when assessing capital requirements.
There is also much uncertainty around the calculation of economic capital. Apart from
guidance note 104 of the Actuarial Society of South Africa that stipulates how CAR
should be calculated for insurers, no single approach exists for the calculation of
economic capital. Calculation methods are still emerging and companies have started to
develop their own internal models to calculate economic capital. Rating agencies such
as Fitch have introduced their own models with the objective of reviewing insurers'
internal models. Various techniques have developed over the last few years to asses a
company's capital requirements. Factors such as company size, resources and
complexity of the insurer influence the use of deterministic or leading edge actuarial
techniques to calculate capital requirements. Stochastic modelling, risk neutral and real
world techniques are examples of sophisticated methods.
Another element to consider in the calculation of economic capital is the understanding,
modelling and quantification of financial and business risks.
Capital adequacy requirement, CAR cover and excess of assets over liabilities were
analysed for five South African insurers. The analysis illustrated that the relationship
between CAR and excess is different for each insurer. This trend can be attributed to
the unique risk profile of the business, the nature of the organisation's products and the
maturity of risk management practices. The analysis also indicated that in the case of all
the five insurers, the growth in excess over the period 2003-2007 exceeded the growth
in CAR for the same period. This scenario could be the result of management actions,
such as risk diversification and sophistication of capital modeling.
It is clear that economic capital is of primary concern to insurance executives,
shareholders and regulators. / AFRIKAANSE OPSOMMING: Die verskillende belanghebbendes in 'n onderneming het teenstrydige doelwitte.
Aandeelhouers wil hulle kapitaalopbrengs vergroot terwyl skuldaktehouers en klante die
kapitaalrisiko wil verminder. Hierdie konflik het gelei tot die ontstaan van ekonomiese
kapitaal. Finansiele dienstemaatskappye, soos versekeraars, bestuur risiko namens
hulle kliente en verdien terselfdertyd wins vir die aandeelhouers van die onderneming.
'n Maatskappy wat van ekonomiese kapitaalanalise gebruik maak, sal die regte balans
vind tussen te veel kapitaal, wat tot buitensporige versekeringskoste kan lei, en te min
kapitaal, wat tot 'n onaanvaarbare risiko van bankrotskap kan lei.
Gesonde finansiele bestuur is nodig om die onderneming se kapitaalmiddele te bestuur.
Die bestuurders se doel is om 'n ekonomiese kapitaalvereiste vir die onderneming vas te
stel wat enige finansiele skokke of verliese kan absorbeer en wat die buigsaamheid wat
nodig is om die daaglikse werksaamhede voort te sit, kan voorsien. Die vraag is dus of
die hoeveelheid kapitaal wat nodig is, bepaal moet word op grond van 'n statutere
beskouing van solvensie of 'n "ekonomiese" (billike waarde) beskouing van solvensie.
Die statutere beskouing van solvensie is die kapitaaltoereikendheidsvereiste (KTV)
soos beskryf deur die Raad op Finansiele Dienste (RFD). KTV voorsien die versekeraar
van 'n vertroue van ongeveer 95% in sy vermoe om sy verpligtinge na te kom soos wat
hulle betaalbaar word. Meer maatskappye neig na 'n ekonomiese kapitaalbenadering
wanneer hulle hulle kapitaalbehoeftes bepaal.
Daar bestaan ook baie onsekerheid oor die berekening van ekonomiese kapitaal.
Behalwe riglyn 104 van die Aktuariele Vereniging van Suid-Afrika wat bepaal hoe KlV
vir versekeraars bereken moet word, is daar geen enkele benadering vir die berekening
van ekonomiese kapitaal nie. Nuwe berekeningsmetodes kom steeds te voorskyn en
maatskappye het begin om hulle eie interne modelle om ekonomiese kapitaal te
bereken, te ontwikkel. Graderingsagentskappe soos Fitch het hulle eie modelle ingestel
met die doel om versekeraars se interne modelle te beoordeel. Verskeie tegnieke om 'n
maatskappy se kapitaalbehoeftes vas te stel, is oor die afgelope paar jaar ontwikkel.
Faktore soos maatskappygrootte, hulpbronne en saamgesteldheid van die versekeraar
belnvloed die gebruik van deterministiese of ultramoderne aktuariele tegnieke om
kapitaalbehoeftes te bereken. Stogastiese modellering, risikoneutrale- en reelewereldtegnieke
is voorbeelde van gesofistikeerde metodes.
Nog 'n beginsel om in gedagte te hou in die berekening van ekonomiese kapitaal is die
verstaan, modellering en kwantifisering van finansiele en sakerisiko's.
Kapitaaltoereikendheidsvereiste-dekking en oorskryding van bates oor aanspreeklikheid
van vyf Suid-Afrikaanse versekeraars is ontleed. Die ontleding het geillustreer dat die
verhouding tussen KTV en oorskryding vir elke versekeraar anders is. Hierdie neiging
kan toegeskryf word aan die unieke risikoprofiel van die onderneming, die aard van die
onderneming se produkte en die effektiwiteit van risikobestuurspraktyke. Die ontleding
het ook aangedui dat die toename in die oorskryding gedurende die tydperk 2003-2007
in die geval van al vyf die versekeraars meer was as die toename in KTV gedurende
dieselfde tydperk. Hierdie scenario kan die gevolg wees van bestuursaksies soos
risikodiversifikasie en verfyning van kapitaalmodellering.
Dit is duidelik dat ekonomiese kapitaal van pnmere belang is vir
versekeringsbestuursbeamptes, -aandeelhouers en -reguleerders.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:sun/oai:scholar.sun.ac.za:10019.1/6414 |
| Date | 12 1900 |
| Creators | Beukes, Nicky |
| Contributors | Smith, J., Stellenbosch University. Faculty of Economic and Management Sciences. Graduate School of Business. |
| Publisher | Stellenbosch : Stellenbosch University |
| Source Sets | South African National ETD Portal |
| Language | en_ZA |
| Detected Language | Unknown |
| Type | Thesis |
| Rights | Stellenbosch University |
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