Posts Tagged ‘FIT’



August 30th, 2010

Guy Carpenter’s Financial Intelligence Team: Top Stories, 2010 Year to Date

Posted at 1:00 AM ET

Financial Intelligence Team
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Here we highlight the top stories from Guy Carpenter’s Financial Intelligence Team that appeared on GCCapitalIdeas.com in 2010.

QIS5 - Premium and Reserve Risk: Sufficient Consideration of Non-proportional Reinsurance?  On July 6, 2010 the Committee of European Insurance and Occupational Pensions Supervisors published the technical specification for the latest Solvency II Quantitative Impact Study (QIS) 5. QIS5 is scheduled to be carried out from August to November of 2010, with a report summarizing the results scheduled for release in April of 2011. Regarding the non-life premium and reserve and risk, Guy Carpenter & Company, LLC has observed a return to capital requirements more in line with QIS4 and an implicit incentive for the use of an internal model.

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Solvency II - Non-Life Underwriting Risk in Light of QIS 5: On April 15th, 2010, the European Commission (EC) published its draft technical specifications for the next Quantitative Impact Study (QIS) 5, which will be implemented from August to November of 2010. Based on empirical evidence, the general calibration of the standard formula solvency capital requirement (SCR) may fall between the calibration of QIS 4 and the calibration seen in the rigid proposals of the various consultation papers (CP) submitted during 2009. This article takes a deeper look at the calibration of non-life underwriting risk as part of the overall SCR calculation.

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Solvency II - Approval of Internal Models:   The Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) published many consultation papers in 2009 focusing on Level 2 implementation measures for Solvency II. Consultation Paper (CP) 37 addressed the procedures for approval of internal models. It was followed by a final paper entitled “CEIOPS Advice for Level 2 Implementing Measures on Solvency II ‘The procedure to be followed for the approval of an internal model’”, published in October, 2009.

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August 23rd, 2010

QIS5 – Premium and Reserve Risk: Sufficient Consideration of Non-proportional Reinsurance?

Posted at 1:00 AM ET

Frank Achtert, Managing Director, Financial Intelligence Team, and Sebastien Portmann, Vice President, Financial Intelligence Team
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On July 6, 2010 the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) published the technical specification for the latest Solvency II Quantitative Impact Study (QIS) 5. QIS5 is scheduled to be carried out from August to November of 2010, with a report summarizing the results scheduled for release in April of 2011. Regarding the non-life premium and reserve and risk, Guy Carpenter & Company, LLC has observed a return to capital requirements more in line with QIS4 and an implicit incentive for the use of an internal model.

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May 24th, 2010

Solvency II – Non-Life Underwriting Risk in Light of QIS 5

Posted at 1:00 AM ET

Frank Achtert, Managing Director, Financial Intelligence Team, and Sebastien Portmann, Vice President, Financial Intelligence Team
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On April 15th, 2010, the European Commission (EC) published its draft technical specifications for the next Quantitative Impact Study (QIS) 5, which will be implemented from August to November of 2010. Based on empirical evidence, the general calibration of the standard formula solvency capital requirement (SCR) may fall between the calibration of QIS 4 and the calibration seen in the rigid proposals of the various consultation papers (CP) submitted during 2009. This article takes a deeper look at the calibration of non-life underwriting risk as part of the overall SCR calculation.

Continue reading…

April 28th, 2010

Top Stories on Solvency II: 2010 Year to Date

Posted at 9:00 AM ET

We bring together here links to all of GC Capital Ideas’ top stories covering Solvency II published in 2010.

Solvency II - Approval of Internal Models:   The Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) published many consultation papers in 2009 focusing on Level 2 implementation measures for Solvency II. Consultation Paper (CP) 37 addressed the procedures for approval of internal models. It was followed by a final paper entitled “CEIOPS Advice for Level 2 Implementing Measures on Solvency II ‘The procedure to be followed for the approval of an internal model’”, published in October, 2009. This series reviews the implementation measures described in the final papers. Implementation measures for the use of partial internal models are briefly described in these two CEIOPS papers. 

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Solvency II In-Depth:   Guy Carpenter & Company, LLC sponsored this extended roundtable discussion that considered the progress made by (re)insurance as the Solvency II regime approaches. Held in London, it was attended by a number of UK and continental Europe industry leaders, including Guy Carpenter Managing Director and European Solutions Group Leader Eric Paire. We present the text of the roundtable discussion here as it appeared in Reinsurance Magazine.

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Corporate Decision Making Using Economic Capital Models:   In the 1980s many large general insurance companies investigated the use of dynamic financial analysis for corporate decision making. Only a small number of insurers and reinsurers, many of which were European, were able to develop dynamic financial models that were adequate for use in decision making. The primary obstacles to implementation were actuarial knowledge and computer technology. By the early 2000s, technology had improved, actuaries had developed techniques that allowed better quantification of insurance risks and dynamic financial analysis had evolved into enterprise risk management (ERM) supported by economic capital models. With these improvements, regulators began to develop solvency rules that create incentives for insurers to implement economic capital models. Although the current impetus for economic capital models is regulatory, the original purpose of enhanced strategic decision making is still valid and companies that use their economic capital models for ERM will be industry leaders.

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Higher Pressure on Cat Risk Under Solvency II:   In 2009, the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) issued details of its Level 2 implementation measures for Solvency II in three waves of consultation papers. The capital charge for the catastrophe risk sub-module (NLCAT), a key driver of capital for non-life carriers and reinsurers, is covered in various publications, primarily in “CEIOPS’ advice for Level 2 Implementation Measures on Solvency II: SCR standard formula - Article 111 Non-Life Underwriting Risk (former CP 48)” and Consultation Paper (CP) 71 - “SCR Standard Formula - Calibration of non-life underwriting risk”.

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Solvency II - Rationale for the Capital Requirement Increase for Underwriting Risk:   In its series of Consultation Papers on Level 2 implementation Measures for Solvency II, the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) drafted, in Consultation Paper 71, a new proposal for the calibration of non-life underwriting risk. Additionally, CEIOPS published its final and third set of advice to the European Commission (EC) at the end of January 2010. The purpose of this briefing is to outline the rationale provided by CEIOPS behind the proposed increase in the SCR in respect of non-life underwriting risk.

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Solvency II: CEIOPS Third Set of Advice, An Overview:   The Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) published its final and third set of advice to the European Commission (EC) at the end of January.

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Solvency II - Gearing up for tougher Capital Requirements:   The development of Solvency II continues to be one of the most significant regulatory developments for the insurance industry applicable to both primary carriers and reinsurers. European insurers are starting to focus now on the risk-sensitive regime they will face in 2012, especially on the impact of the risk-based quantitative requirements for measuring financial positions and capital adequacy.

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March 30th, 2010

Solvency II - Approval of Internal Models: Part I, Introduction & Prerequisites for Approval

Posted at 10:00 AM ET

Eddy Vanbeneden, Managing Director
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The Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) published many consultation papers in 2009 focusing on Level 2 implementation measures for Solvency II. Consultation Paper (CP) 37 addressed the procedures for approval of internal models. It was followed by a final paper entitled “CEIOPS Advice for Level 2 Implementing Measures on Solvency II ‘The procedure to be followed for the approval of an internal model’”, published in October, 2009.

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December 25th, 2009

2009 Top Stories: Solvency II

Posted at 12:30 AM ET

With 2009 coming to a close, this week we’re taking a look at the most popular stories of the year.

Where Are We on Solvency II?: Solvency II will require insurers and reinsurers domiciled in the European Economic Area (EEA) to assess their regulatory capital requirements within a forward-looking risk sensitive framework. Solvency II has reached a decisive point in its development, as the focus moves to how the directive will be implemented in practice and how it will shape the competitive landscape of the insurance industry. From a quantitative perspective, the results of the Quantitative Impact Study 4 (QIS 4) were published by the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) in November 2008. From a political perspective, the group support concept was abandoned to avoid further jeopardizing the targeted implementation by 2012.

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Cat Risk in a Solvency II Environment: Many approaches exist for use in assessing catastrophe risks. Under Quantitative Impact Study 4 (QIS4), the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) provided a list of those that can be used for Solvency II compliance and, in the interim, managing risk and capital effectively. The full stochastic modeling of catastrophe risk using an internal model, such as Guy Carpenter’s G-Cat® tools and MetaRisk®, provides the most information.

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December 19th, 2009

ERM Offers Competitive Compliance for Solvency II: Link Index

Posted at 1:00 AM ET

ERM Offers Competitive Compliance for Solvency II, Part I >>

ERM Offers Competitive Compliance for Solvency II, Part II >>

ERM Offers Competitive Compliance for Solvency II, Part III >>

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December 10th, 2009

A Survey of Capital Allocation Metrics: Conclusion

Posted at 1:00 AM ET

Susan Witcraft, Managing Director, Financial Intelligence Team, Instrat
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Insurers have choices in evaluating how to allocate capital and its cost. The ultimate goal is to strike a balance between feasibility (based on management acceptance and effort) and capital optimization. Eventually, most companies are likely to migrate towards contribution methods, along the lines of co-xTVaR and the shared asset approach, with thresholds varying with the specific questions being reviewed and specific corporate risk tolerances.

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December 9th, 2009

A Survey of Capital Allocation Metrics: Comparison

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Susan Witcraft, Managing Director, Financial Intelligence Team, Instrat
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A comparison of the percentages of capital or the cost of capital allocated to each line using each of the proportional methods is shown in Figure 7. As you can see, there are significant differences in allocation percentages among the different metrics.

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December 8th, 2009

A Survey of Capital Allocation Metrics: Shared Asset

Posted at 1:00 AM ET

Susan Witcraft, Managing Director, Financial Intelligence Team, Instrat
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The shared asset method is a bit different from the other proportional approaches to capital allocation.1 The cost of capital is allocated to line rather than allocating capital itself. Capital is viewed as a shared asset to support all risks assumed by the insurer, and the company estimates the cost of replacing capital at different levels of loss. Figure 5 shows an illustration of these differing cost of capital levels, with the cost increasing as more capital is lost.

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