Boards that approve group capital adequacy without stress-testing capital fungibility under combined-entity scenarios are approving a capital position that may not survive the first multi-jurisdiction stress event. One well-designed scenario that models simultaneous capital demands across entities reveals fungibility gaps that standalone analysis misses.
Boards that approve outward reinsurance programmes without testing their capital impact cannot answer the question that matters most: what fails first when the programme's unmeasured capital drag intensifies?
The board's role is to ensure that management's pursuit of premium growth does not outpace the frameworks that protect capital. Asking the right governance questions about risk-adjusted hurdles is how the board fulfills that duty.