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.

Export

Glossary
TermGroupingOrganization or Jurisdiction Defining TermSource of DefinitionDefinition
Available CapitalSolvency termsChinaCIRC C-ROSS Conceptual FrameworkThe economic resources that can absorb losses in insurance undertakings on a going-concern basis or upon liquidation. Available capital is equal to admitted assets minus admitted liabilities of insurance undertakings.
Available CapitalSolvency termsIAISIAIS Supervisory Material(Capital) The financial resources of an insurer and different variation/calculations of capital may be referred to as equity capital (i.e. paid-up, share, subscribed), economic capital and regulatory capital.
Available CapitalSolvency termsThe European Economic AreaCEA Solvency IIInternally defined capital measure based on the companies' valuation of the market-consistent value of assets minus the market-consistent value of obligations.
Available CapitalSolvency termsThe European Economic AreaSolvency IINot specifically defined. The term eligible own funds is used as term for the amount of own funds to cover the Solvency Capital Requirement.
Available CapitalSolvency termsUnited StatesNAIC ORSA MANUALThe amount of resources that an enterprise has at a given point in time under a defined valuation or accounting basis (e.g., economic, statutory, GAAP, or a combination) to support its business and under the defined valuation represents the insurers assessment of the types of capital required to support its business.
Available Solvency MarginSolvency termsThe European Economic AreaCEA Solvency IIThe difference between the value under regulatory measurement of the eligible capital held by an insurer, and the sum of the values under regulatory measurement of the obligations.
Available Solvency MarginSolvency termsThe European Economic AreaSolvency IINot specifically defined. In Solvency II this is noted as excess own funds and be would be equal to the difference between the eligible own funds and the Solvency Capital Requirement.
Deficit CapitalSolvency termsThe European Economic AreaSolvency IISolvency deficit (term is mentioned in Solvency II Directive art. 221)
Deficit CapitalSolvency termsUnited StatesNAIC ORSA MANUALIf the amount of available capital is less than the determined risk capital of an enterprise, then the enterprise is said to have deficit capital.
Defined Security MarginSolvency termsUnited StatesNAIC ORSA MANUALMinimum threshold of available capital that a company wishes to achieve or maintain, consistent with the company's business strategy, risk appetite and risk tolerance.
Double GearingSolvency termsIAISIAIS Supervisory MaterialUsed to describe a situation where the same capital is used simultaneously as a buffer against risk in two or more legal entities of a conglomerate.
Double GearingSolvency termsThe European Economic AreaCEA Solvency IISituation in which one entity holds capital for regulatory purposes, which is issued by another entity within the same group and the issuer is also using the same capital for regulatory purposes. In that situation, externally generated capital of the group is 'geared up' twice; first by the parent, and then a second time by the dependent.
Double GearingSolvency termsThe European Economic AreaSolvency IIThe double use of own funds eligible for the Solvency Capital Requirement among the different insurance or reinsurance undertakings taken into account in that calculation shall not be allowed. (Solvency II Directive art. 222)
Double GearingSolvency termsUnited StatesNAIC ORSA MANUALUsed to describe situations where multiple companies (typically parent and subsidiary) are using shared capital to buffer against risk occurring in separate entities.
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.
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.
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.
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).
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))
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.
FungibilitySolvency termsThe European Economic AreaCEA Solvency IIFungible Capital - That part of the capital of a group which can be transferred between different legal entities of the group.
FungibilitySolvency termsUnited StatesNAIC ORSA MANUALWithin a group context, the ability to redeploy available capital from one entity to another. Fungibility is reduced where the movement of available capital within the group is constrained or regulation prohibits it.
Fungible Capital (see Fungibility)Solvency termsThe European Economic AreaCEA Solvency IIThat part of the capital of a group which can be transferred between different legal entities of the group.
Group CapitalSolvency termsUnited StatesNAIC ORSA MANUALGroup capital represents the aggregate available capital or risk capital for the entire group. It will be impacted by the interaction of the risks and capital of the individual entities within the group, with properties such as diversification, fungibility and the quality and form of capital being important drivers.
Minimum Capital RequirementSolvency termsChinaCIRC C-ROSS Conceptual FrameworkThe amount of capital required according to the regulations to cover the adverse impact on the undertaking's solvency capability arising from market risk, credit risk, insurance risk, etc.
Minimum Capital RequirementSolvency termsIAISIAIS Supervisory MaterialIn the context of a legal entity's capital adequacy assessment, the level of solvency at which, if breached, the supervisor would invoke its strongest actions, in the absence of appropriate corrective action by the insurer.
Minimum Capital RequirementSolvency termsThe European Economic AreaCEA Solvency IIThe capital level representing the final threshold that triggers ultimate supervisory measures in the event that it is breached.
Minimum Capital RequirementSolvency termsThe European Economic AreaSolvency IIA minimum level of security below which the amount of financial resources should not fall (Solvency II Directive (60)).
Risk CapacitySolvency termsFinancial Stability BoardFSB Principles for an Effective Risk AppetiteThe maximum level of risk the financial institution can assume given its current level of resources before breaching constraints determined by regulatory capital and liquidity needs, the operational environment (e.g. technical infrastructure, risk management capabilities, expertise) and obligations, also from a conduct perspective, to depositors, policyholders, shareholders, fixed income investors, as well as other customers and stakeholders.
Risk CapacitySolvency termsInternational Actuarial AssociationIAA - Acturial Aspects of ERM for Insurance CompaniesThe extent of risk that an organisation is capable of undertaking
Risk CapitalSolvency termsInternational Actuarial AssociationIAA - Acturial Aspects of ERM for Insurance CompaniesRisk Based Capital (RBC) Capital Requirements that reflect the risk profile of the financial institutions.
Risk CapitalSolvency termsInternational Risk Management InstituteIRMI TermsCapital required to finance the consequences of business risks.
Risk CapitalSolvency termsThe European Economic AreaSolvency IIThe term is mentioned once in de Directive (Solvency II Directive (50)), but has not been defined.
Risk CapitalSolvency termsUnited StatesNAIC ORSA MANUALAn amount of capital calculated to be sufficient to withstand adverse outcomes associated with various risks of an enterprise, up to a pre-defined security standard.
SolvencySolvency termsIAISIAIS Supervisory MaterialAbility of an insurer to meet its obligations to policyholders when they fall due. Solvency includes capital adequacy but also involves other aspects of a solvency regime, for example, technical provisions, qualitative aspects (such as would be addressed in an enterprise risk management framework), supervisory review and supervisory reporting.
SolvencySolvency termsInternational Actuarial AssociationIAA Deriving Value from ORSAThe adequacy of available economic or regulatory capital to meet future obligations or regulatory requirements.
SolvencySolvency termsUnited StatesNAIC ORSA MANUALFor a given accounting basis, the state where, and extent to which, assets exceed liabilities.
Solvency Capital RequirementSolvency termsThe European Economic AreaCEA Solvency IIThe amount of capital to be held by an insurer to meet the Pillar I requirements under the Solvency II regime.
Solvency Capital RequirementSolvency termsThe European Economic AreaSolvency IIThe supervisory regime should provide for a risk-sensitive requirement, which is based on a prospective calculation to ensure accurate and timely intervention by supervisory authorities. (Solvency II Directive (60)