10. Aggregation and Diversification
Effective from Jan 01 2024 - Jan 30 2009
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| This section would describe how the results of the various risk assessments are brought together and an overall view taken on capital adequacy. This requires an acceptable methodology to combine risks using quantitative techniques. At the general level, the overall reasonableness or the detailed quantification approaches might be compared with the results of an analysis of capital planning and a view taken by senior management as to the overall level of capital that is appropriate. | ||
| ■ | Dealing with the technical aggregation, the following may be described: | |
| i. | any allowance made for diversification, including any assumed correlations within risks and between risks and how such correlations have been assessed including in stressed conditions; | |
| ii. | the justification for diversification benefits between and within legal entities, and the justification for the free movement of capital between legal entities in times of financial stress. | |