Life insurer chief financial officers may be shifting toward more use of economic capital principles when managing company capital.
About 67% of life company CFOs now say they are using regulatory or rating agency capital ratios to manage their overall business, up from 60% in January 2008, according to Towers Watson & Company, New York (NYSE:TW).
But only 45% of the life CFOs who participated in a Towers Watson survey said they will use regulatory and rating agency ratios to manage their companies over the next 12 months.
About 21% of the participating CFOs said they plan to make more use of the economic capital concept in the next year; about 10% are using that approach today.
Economic capital is the least amount of capital that a company needs to be able to absorb unforeseen losses in times of extreme stress, Towers Watson says.
Other Towers Watson survey findings:
- 77% of life CFOs said capital management practices are getting more attention at their companies today than they were in January 2008.
- 73% of CFOs predicted that their companies would be reporting a year-over-year increase in first-quarter net income.