International ERM Glossary

The International ERM Glossary is intended to provide users with a set of definitions that are in common usage around the world by actuaries, regulators and members of the insurance industry. The purpose in developing the glossary is to help provide a common understanding of the terms currently in use, as definitions and meanings have varied over time, and among practitioners. It can also be used as a training and educational tool for regulators.

The glossary can be consulted per letter, organization or grouping.

DISCLAIMER: The content of the International ERM Glossary has been compiled by the Joint ORSA Subcommittee of the Insurance Regulation Committee and the Enterprise and Financial Risk Committee of the IAA. This information has been collated and presented for educational and informational purposes to the members of the IAA and interested parties. The IAA assumes no responsibility for the accuracy, completeness, currency, reliability of the information in the International ERM Glossary or access to any information contained on any of the sources cited in the Glossary. The IAA, its employees and officers shall not be liable for any loss or damage, direct or indirect, which may arise or occur as a result of the use of or reliance upon any of the material in the International ERM Glossary.

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Glossary
TermGroupingOrganization or Jurisdiction Defining TermSource of DefinitionDefinition
Economic CapitalSolvency termsIAISIAIS Supervisory MaterialThe capital needed by the insurer to satisfy its risk tolerance and support its business plans and which is determined from an economic assessment of the insurer's risks, the relationship of these risks and the risk mitigation in place.E
Economic CapitalSolvency termsInternational Actuarial AssociationIAA - Acturial Aspects of ERM for Insurance CompaniesThe amount of capital a company requires to cover its obligations with a given degree of confidence over a specific time horizon.E
Economic CapitalSolvency termsInternational Actuarial AssociationIAA Deriving Value from ORSAThe amount of capital a company requires to survive or to meet a business objective for a specified period of time and risk metric, given its risk profile.E
Economic CapitalSolvency termsInternational Risk Management InstituteIRMI TermsMarket value of assets minus fair value of liabilities. Used in practice as a risk-adjusted capital measure; specifically, the amount of capital required to meet an explicit solvency constraint (e.g., a certain probability of ruin).E
Economic CapitalSolvency termsThe European Economic AreaSolvency IINot specifically defined. The Solvency Capital Requirement should be determined as the economic capital to be held by insurance and reinsurance undertakings in order to ensure that ruin occurs no more often than once in every 200 cases or, alternatively, that those undertakings will still be in a position, with a prob­ability of at least 99,5 %, to meet their obligations to policy holders and beneficiaries over the following 12 months. That economic capital should be calculated on the basis of the true risk profile of those undertakings, taking account of the impact of possible risk-mitigation techniques, as well as diversification effects. (Solvency II Directive (64))E
Economic CapitalSolvency termsUnited StatesU.S. ASB TermsThe amount of capital an organization requires to survive or to meet a business objective for a specified period of time and risk metric, given its risk profile.E