NU Online News Service, Jan. 11, 3:30 p.m. – Standard & Poor’s in New York says its has revised its financial product company model to incorporate an insurer’s management and tolerance of risk into its analysis of capital adequacy. S&P uses the model to rate financial service firms for fiscal soundness.
S&P says it developed the new model in response to the increasing spread of arbitrage activities of certain life insurers and the continued refinement of risk management activities by various insurance companies.
The FPC model allows insurers to earn recognition for using integrated risk management techniques to manage the interest rate, credit and operational risk associated with their assets and liabilities. Traditionally, the rating service’s risk-based capital model had relied on the blanket application of a uniform rating methodology. The new approach will permits an increasingly differentiated analysis from company to company as company-specific risk profiles within the industry continue to polarize, S&P says.