Posts Tagged ‘competitive compliance’



June 22nd, 2011

Succeeding Under Solvency II: Entire White Paper Series

Posted at 1:00 AM ET

Guy Carpenter recently published a series of three white papers on Solvency II covering key issues of relevance to (re)insurers. We bring the entire series together here.

Succeeding Under Solvency II: Pillar One, Capital Requirements; Part I: Despite its nominally European focus, Solvency II presents a wide range of considerations - and opportunities - to insurance entities worldwide. This new regulatory framework will enact a fundamental change in the way the European insurance industry looks at risk and risk management practices, as it will force the convergence of all aspects of risk quantification with those of business decision making. All businesses that have operations, subsidiaries or affiliates in Europe, write coverage in Europe or do business with insurers in Europe should be preparing now for these wide-ranging changes.

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Succeeding Under Solvency II: Pillar One, Capital Requirements; Part II: Pillar One’s Impact on Insurers: The first pillar of Solvency II is the quantitative component of the new regulations. It deals with the capital requirements of insurers wishing to provide coverage in the EC markets.

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Succeeding Under Solvency II: Pillar One, Capital Requirements; Part III - Conclusion: It is clear that Solvency II presents a host of challenges to (re)insurers. With a disciplined and thoughtful approach, many companies will see opportunities to lessen the impact - or even to improve their competitive stance in the industry. Below we explore in detail some of the key considerations, challenges and opportunities associated with Solvency II.

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Succeeding Under Solvency II, Corporate Governance (Pillar Two) and Disclosure (Pillar Three): Preparation: Preparing for “Pillar V”: Implementation of the Solvency II regime is approaching rapidly. The directive is expected to take effect in January 2013 and will mostly affect, but not be limited to, (re)insurers operating in or covering risks in Europe.

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Succeeding Under Solvency II, Corporate Governance (Pillar Two): To support Solvency II compliance, (re)insurers need to implement rigorous corporate governance programs that address all areas of the company, from the tone and activities of company leadership through granular risk and capital management activities. The corporate governance framework should define a clear and robust organizational structure - including an adequate operational structure, the clear allocation of tasks and responsibilities, organizational transparency and efficient information systems across all business activities. The structure should delineate a clear separation between the risk management function and the audit function. There should be a clearly apparent independence of the two functions from each other. Management’s responsibilities must be evident.

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Succeeding Under Solvency II, Disclosure (Pillar Three), How Guy Carpenter Can Help: Two levels of disclosure are required under Pillar III of Solvency II: regulatory and public. The details discussed above about Pillar II reflect the corporate governance disclosures necessary under the directive. Pillar I requirements address the disclosure of risk and capital levels to regulators. Additionally, (re)insurers affected by Solvency II will have to disclose risk and capital information - as well as modeling details - to the public.

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Succeeding Under Solvency II, Reinsurance and Counterparty Risk: Impact of Solvency II on the Reinsurance Market: In this briefing, the third in the series, we concentrate on special considerations for reinsurance and counterparty risk.

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Succeeding Under Solvency II, Reinsurance and Counterparty Risk: Solvency II Counterparty Default Risk Considerations: Counterparty default risk is one of the core components of the Solvency Capital Requirement (SCR). This module has undergone substantial change over the several quantitative impact studies (QIS) as the supervisors attempted to find an appropriate measure of the risk. In the QIS 5 final report, EIOPA noted that this module received the most criticism for the “overly complex approach” relative to the materiality of counterparty default risk within the overall risk-based capital requirement. We expect to see additional changes that will simplify the calculation of risk.

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Succeeding Under Solvency II, Reinsurance and Counterparty Risk: How Guy Carpenter Can Help: Solvency II will profoundly impact the reinsurance market, though perhaps not exactly in the ways reinsurers or regulators have anticipated. This impact will not be limited to European reinsurance markets, but will be felt globally. Advances in disclosure and overall market strength will come with costs, including a more volatile pricing environment.

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April 14th, 2011

Succeeding Under Solvency II, Disclosure (Pillar Three), How Guy Carpenter Can Help

Posted at 1:00 AM ET

Pillar III: Disclosure

Two levels of disclosure are required under Pillar III of Solvency II: regulatory and public. The details discussed above about Pillar II reflect the corporate governance disclosures necessary under the directive. Pillar I requirements address the disclosure of risk and capital levels to regulators. Additionally, (re)insurers affected by Solvency II will have to disclose risk and capital information - as well as modeling details - to the public.

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April 13th, 2011

Succeeding Under Solvency II, Corporate Governance (Pillar Two)

Posted at 1:00 AM ET

David Flandro, Global Head of Business Intelligence, Claude Lefebvre, Head of GC Analytics EMEA Region, Eddy Vanbeneden, Head of GC Analytics France and Benelux and Frank Achtert, Managing Director
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To support Solvency II compliance, (re)insurers need to implement rigorous corporate governance programs that address all areas of the company, from the tone and activities of company leadership through granular risk and capital management activities. The corporate governance framework should define a clear and robust organizational structure - including an adequate operational structure, the clear allocation of tasks and responsibilities, organizational transparency and efficient information systems across all business activities. The structure should delineate a clear separation between the risk management function and the audit function. There should be a clearly apparent independence of the two functions from each other. Management’s responsibilities must be evident.

Continue reading…

January 13th, 2011

Industry Issues and Trends: Regulatory Activity Remains a Central Focus, Part II: United States and Europe

Posted at 1:00 AM ET

141x141jan1thumb6US: The Legacy of the Financial Crisis

While Solvency II remains very much on the radar of US insurance and reinsurance companies, another important regulatory initiative - the Neal Bill - may encounter hurdles following the recent political shifts in Washington. This legislation seeks to discourage companies from ceding ‘excessive’ portions of their US premiums to offshore affiliates to lower their tax burden. A revised version of the bill was also incorporated into the Obama Administration’s 2010 budget plan. However, prospects for the full bill’s passage diminished in the 2010 US midterm elections, when the Republican Party took control of the House of Representatives and eroded the Democratic majority in the Senate. As demonstrated by the recent extension of the Bush tax cuts, the Obama Administration has been compelled to compromise on its legislative agenda, and the shift in power could prevent the Neal Bill from passing into law.

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January 12th, 2011

Industry Issues and Trends: Regulatory Activity Remains a Central Focus, Part I: Solvency II: a Global Issue

Posted at 1:00 AM ET

141x141jan1thumb7We enter 2011 with forces at work that are poised to reshape the global reinsurance industry. While the largest of them - Europe’s Solvency II regulatory framework - will not become fully effective until 2013, preparations for its sweeping changes will be an important agenda item for many firms in the year ahead.

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December 2nd, 2010

Solvency II Update: QIS5 Windstorm Scenarios Are Within Range of Industry Models

Posted at 3:00 AM ET

Frank Achtert, Managing Director, Eddy Vanbeneden, Managing Director, and Maximilian Strasser, Senior Vice President
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European insurers and reinsurers will face requirements for full compliance with the new Solvency II capital regime requirements in just over two years. Even if this introduction is phased in — as the European Commission has reportedly indicated it could be — these requirements will have a wide-ranging and profound impact on the insurance industry throughout Europe.

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October 1st, 2010

Creating Value by Integrating Risk Management with Capital Management and Overall Business Strategy

Posted at 1:00 PM ET

Joan Lamm-Tennant, PhD, Global Chief Economist and Risk Strategist
David Lightfoot, CPA, Head of Analytics, Asia Pacific
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Introduction
Enterprise Risk Management (ERM) enables an organization to integrate its risk management strategy with its capital and business strategies, ultimately improving the linkage between operational and financial decision making. ERM consists of four elements: identifying and managing critical risks; quantifying the impact of these risks on capital adequacy and earnings, setting risk appetite and tolerance, and embedding risk management into the strategic decision-making process. Several studies have shown that firms with stable results consistently create more value for stakeholders than those with volatile results.

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December 16th, 2009

ERM Offers Competitive Compliance for Solvency II, Part III

Posted at 1:00 AM ET

mango_smallDon Mango, Chief Actuary
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For Solvency II, regulators have not yet announced plans to approve specific software platforms. Instead, they will focus on the model’s capabilities, embeddedness, implementation and use. For example, Guy Carpenter’s proprietary economic capital model MetaRisk® can be used as the basis for an internal model for Solvency II. MetaRisk is among the fastest, most robust and easiest solutions to use in the (re)insurance industry, making it possible to model countless combinations of risk and capital, identifying the optimal levels and enabling companies to make the allocation decisions that will yield the most favorable results for a given risk tolerance profile.

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December 15th, 2009

ERM Offers Competitive Compliance for Solvency II, Part II

Posted at 1:00 AM ET

mango_smallDon Mango, Chief Actuary
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Beneath the surface, systemic risks, hidden accumulations and correlated threats also must be explored. These are the risks that cannot be diversified away. Others may result from a chain reaction, such as a casualty catastrophe caused by a class action lawsuit, affecting vast numbers of policyholders. In the extreme, (re)insurers should be ready for simultaneous major loss events that are accompanied by a plunge in asset values, inflation and a disproportionately high replacement cost of capital.

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