Financial Ratings vs. Stress Tests
January 1, 2008
The current model of “financial ratings” – institutions paying the rating agencies for a rating – is broken. They were as much a cause of the 2008 financial meltdown as anything else, but ratings entities refuse to accept culpability for their role in the crisis. With investor confidence shaken and new proposals for regulatory frameworks circulating, the question is: what role, if any, should the ratings agencies play in the new financial system? If they remain a part of the financial system, how should they be changed, what should they include, and should stress tests be a part of the equation?
Economic Value of Insurable Capacity
Each person has a vaguely determined life insurance capacity, i.e., the maximum insurance allowed. How is this determined? Does this capacity have a value? How much is it? Further, an analysis of insurable capacity is not complete without an examination of insurable interest. The insurance industry is wrought with inconsistencies involving this concept. Issues such as COLI, BOLI, STOLI represent gray areas of what constitute insurable interest.