What are the main benefits of setting up a subsidiary? I am thinking along the lines of how it would impact capital requirements.
Here are a couple of benefits to get people started: 1. It makes it easier to sell this part of the business at a later date. 2. It might have a gearing effect on the FAR of the main company, as we'd be dividing the free assets by a smaller denominator. (This was explored in the Subject 402, April 1999 paper if interested!) Feel free to add more ... On the downside though, it might reduce the credit for diversification under Solvency II and reduce the scope for offsetting tax losses ...
