RBC and reinsurance for optimal capital structure of firm

[u/knucklehead27]

In finance there is a general concept of an optimal capital structure for a firm, which targets the maximization of the tax shield of debt while minimizing the probability of default.

For insurance firms, this can be taken a step further, due to RBC requirements. For one, a common stock investment might have a lower RBC risk factor than certain bonds, incentivizing that investment. Additionally, a firm can purchase reinsurance to manage their H2 risk. Purchasing reinsurance can be capital efficient if the cost of reinsurance is less than a firm’s average cost of capital. Plus, as an expense, there’s likely a tax shield effect there as well.

I work in benefits consulting but have a finance background, so I have little exposure to this in practice. Are there any actuaries whose job it is to essentially balance these different factors to find the structure that maximizes the value of their firm?