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Willis Re Launches Value Based Capital Management Service

To manage client risk and maximise franchise value

Willis Re, a reinsurance division of insurance broker Willis Group, has launched Value Based Capital Management (VBCM), a service designed to measure risk, manage capital, and maximise franchise value for the reinsurance industry.

VBCM offers insurers a tool to measure and address their complete risk profile based on how best to protect and grow franchise value, said the company.

In focusing on franchise value, VBCM rejects the notion, implicit in many analytic tools, that a client’s business should be valued and therefore managed as if it were in runoff. Like traditional Enterprise Risk Management (ERM), VBCM begins with a comprehensive assessment of an insurer’s overall risk from multiple sources, including underwriting, adverse loss reserve development, stock market volatility, bond defaults, and reinsurer default risk.

The service addresses how much and what form of capital a firm should have given its overall risk profile, and also responds to these critical questions by identifying the amount and type of capital that maximises the insurer’s value as a going concern.

Bill Panning, executive vice president of Willis Re, said: “Willis Re believes that insurers should no longer face the difficult tradeoff between maximising earnings and protecting against risk. VBCM enables insurers to determine for the first time which particular strategic choices will enable them to maximise their franchise value as a going concern. Today’s announcement is the latest in Willis Re’s long history of providing key strategic tools that enable our clients to thrive.

“VBCM’s methodology and the answers it provides are both transparent and practical, at Willis Re, we believe our clients deserve tools that can be indispensable not just to informing strategic decisions, but also to answering the key questions posed by shareholders, rating agencies, analysts, and regulators. In the current market environment, that kind of information is more important than ever.”