Posts Tagged ‘Iain Boyer’



November 2nd, 2009

Impact of Earnings Volatility on Price/Book Ratios

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Financial Intelligence Team
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The link between a company’s earnings and its share price is intuitive and well documented. Equally logical, although far less studied, is the correlation between the volatility of earnings and share price. The favorable impact of stable earnings on market valuation is intuitive considering market capitalization represents a view of future discounted cash flows and unexpected earnings volatility reduces the predictability of those cash flows.

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October 27th, 2009

Update: Risk Profile, Appetite, and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness

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Financial Intelligence Team
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In April 2009, Guy Carpenter’s Financial Intelligence Team published a briefing entitled Risk Profile, Appetite and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness. That briefing included definitions of Risk Profile, Appetite and Tolerance and how these concepts fit into an Enterprise Risk Management (ERM) framework. It also presented the results of our initial Risk Tolerance Benchmarking study, which summarized the information publicly disclosed in this area.

Download the briefing as a PDF >>

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August 28th, 2009

Solvency II – Summary of CEIOPS March Consultation Papers: Allowance of Financial Mitigation Techniques

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Financial Intelligence Team
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CP31 sets out the principles an entity must adhere to in order to allow the recognition of financial mitigation techniques (e.g., financial derivatives) for Solvency Capital Requirement (SCR) purposes. It states the capital requirement should allow for an appropriate reduction to reflect the mitigation techniques in place while avoiding allowing deductions based on inappropriate mitigation techniques.

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August 27th, 2009

Solvency II – Summary of CEIOPS March Consultation Papers: Special Purpose Vehicles

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Financial Intelligence Team
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Special purpose vehicles (SPVs) are used to transfer insurance risks to the capital markets. This document addresses the authorization, regulatory requirements, and scope of supervisory review of SPVs under Solvency II. The requirements refer only to SPVs domiciled in the European Economic Area (EEA); SPVs established outside the EEA are not subject to the rules discussed in this paper.

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August 26th, 2009

Solvency II – Summary of CEIOPS March Consultation Papers: Criteria for Approval of Ancillary Own Funds

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Financial Intelligence Team
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Own funds are comprised of “basic own funds” and “ancillary own funds.” Ancillary own funds are only accepted as own funds under certain limited circumstances. Examples of ancillary own funds are unpaid common shares or letters of credit and guarantees.

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August 25th, 2009

Solvency II – Summary of CEIOPS March Consultation Papers: Valuation of Assets and Other Liabilities

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Financial Intelligence Team
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Consultation Paper 35 sets out principles with regard to the valuation of assets and liabilities (other than Technical Provisions). The objective is to determine the economic (or fair) value of the assets and liabilities and the amount at which they could be exchanged between knowledgeable willing parties in an arm’s length transaction. CEIOPS recommends adopting the International Financial Reporting Standard (IFRS) as a reference framework — with additional specifications to be provided only where IFRS is not compatible with the Solvency II Directive. This would be the case, for instance, for items that can be measured at historical cost under IFRS. The consideration of assets for solvency purposes further requires that all the risks inherent to them be addressed through solvency requirements.

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August 24th, 2009

Solvency II – Summary of CEIOPS March Consultation Papers: Technical Provisions – Treatment of Future Premiums

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Financial Intelligence Team
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The first core principle is that a (re)insurance contract should be recognized as a contract when the entity becomes a party to it. The contract is deemed to have expired when its underlying obligations have expired. Any allowance for options (e.g., paying future premiums, increased cover) under a particular contract should only be taken into account if it increases the best estimate of the liability. The second core principle is that future premiums as well as corresponding benefit payments and expenses which relate to an option or a guarantee can only be considered if their inclusion increases the best estimate of the underlying liability.

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Contributors:

  • Susan Witcraft, Managing Director
  • Frank Achtert, Managing Director
  • Iain Boyer, Managing Director
  • Michelle Harnick, Managing Director
  • Dave Lightfoot, Managing Director
  • Scott Lohman, Managing Director
  • Don Mango, Managing Director
  • Eddy Vanbeneden, Managing Director
  • Jeff Bellmont, Senior Vice President
  • Gina Carlson, Senior Vice President
  • Debbie Griffin, Senior Vice President
  • David Flandro, Senior Vice President
  • Benoît Butel, Vice President
  • Sebastien Portmann, Vice President
August 21st, 2009

Solvency II – Summary of CEIOPS March Consultation Papers: Technical Provisions – Assumptions about Future Management Actions

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Financial Intelligence Team
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For Solvency II compliance, future management actions are primarily relevant in life insurance and should be reflected in the assessment of cash-flows (e.g., changes in asset allocations, bonus rates).

The list of assumptions made on management actions provided by QIS 4 participants was deemed “to be indicative but not comprehensive or useful” by CEIOPS and thus has not been incorporated into CP32.

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August 20th, 2009

Solvency II – Summary of CEIOPS March Consultation Papers: Technical Provisions – Elements of Actuarial and Statistical Methodologies for the Calculation of the Best Estimate

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Financial Intelligence Team
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The best estimate is defined as “the probability-weighted average of future cash-flows, taking account of the time value of money (expected present value of future cash-flows) using the relevant risk-free interest rate term structure.” It is to be calculated gross, with recoverables from reinsurance or special purpose vehicles (SPVs) calculated separately.

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