Question-and-Answer Session
Operator
(Operator Instructions). Your first question comes from the line of Darin Arita with Deutsche Bank.
Darin Arita - Deutsche Bank
I had a question on page 12 with respect to the equity market sensitivity. The global VA impact at yearend '09 with the S&P at 700, that $2.1 billion, is that in addition to the $1.3 billion or is it an $800 million increase?
Liz Zlatkus
No, that is in addition.
Darin Arita - Deutsche Bank
It is in addition. Does that include the use of the onshore captive?
Liz Zlatkus
Yes, it does, except that the onshore captive actually helps us more on the upper equity market levels. It really doesn't have an impact on the lower equity market levels. We are assuming we implement the captive for 2009.
Darin Arita - Deutsche Bank
With respect to the captive, can you talk about your decision on why onshore versus offshore and what are the costs to setting this up?
Liz Zlatkus
Yes. Obviously, this has a lot of complexities as you try to determine the best result, everything from tax implications to how the rating agencies will look through things. So we felt the onshore captive was the best solution for us. In terms of the cost of setting it up, it's not significant. You have to put capital into the captive, but then that capital gets to be utilized in terms of calculating your overall capital requirement.
Operator
Your next question comes from the line of Josh Shanker with Citi.
Josh Shanker - Citi
I wanted to talk about the property casualty space. In terms of considering the competition, one of your competitors has posted their numbers and talked about a downsizing of the type of coverage being purchased. It doesn't necessarily show up in the numbers that you've have shown. Given that you are successful in competing for that small business, I'd like to talk a little bit about that competitive landscape.
Juan Andrade
Clearly, what we had seen in the first six months of the year is the impact of the recession primarily on small business, but also on individual consumers where you see that being reflected in top-line or at least in your premium retention numbers, as you see an increase in audit premiums, in cancellations and endorsement activity as small businesses consolidate operations, small businesses go bankrupt, reduce coverage, et cetera.
Josh Shanker - Citi
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