Platform provides comparison to insurers capital positions
Fitch Ratings has revealed a next-generation stochastic capital model for the insurance industry called PRISM which it promises will change the way insurance risks are viewed by investors and industry observers.
PRISM provides, for the first time, a platform to compare insurers' capital positions on a true economic basis. It allows all the risks in a business to be modelled simultaneously, along with their interactions with one another.
Until now, factor models have looked at risks in isolation. The model will form an integral part of Fitch's insurance rating analysis, beginning with reviews of year-end 2006 financial information.
"The PRISM model represents a significant step forward in the modelling and understanding of risk in the insurance industry," said Greg Carter, managing director of Fitch's EMEA Insurance group. "With this model, Fitch aims to better differentiate risk levels among insurers and align capital requirements with an insurer's risk profile."
