Posts Tagged ‘regulators’



September 11th, 2017

ILS Framework Can Propel London to be The Global Hub, If It Has a Supportive Regulator – GC@MC Commentary

Posted at 12:30 AM ET

des-potter-smDes Potter, Head of GC Securities, EMEA

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  • London can establish itself as the global hub for innovative reinsurance risk transfer
  • U.K. regulators must be more responsive to enable the U.K. market to be more competitive
  • Developing an insurance-linked securities (ILS) market will help London maintain its global standing

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February 15th, 2016

Regulation; A World View: Conclusion

Posted at 1:00 AM ET

The costs associated with compliance and disclosure will continue to rise as insurance regulators and rating agencies increase their scrutiny of the industry. (Re)insurers that operate on a global scale, for example, may wrestle with the complexity of multiple capital requirements and the return targets of investors. Smaller companies, often with fewer resources, may be forced to allocate a higher percentage of senior management’s time to compliance. It will become increasingly more important for (re)insurers to avoid unnecessary and redundant activity when seeking regulatory approval.

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February 11th, 2016

Meeting the Challenges: Catastrophe Modeling

Posted at 1:00 AM ET

In realizing the goal of profitable growth, (re)insurers require a trusted partner to help them manage a rapidly evolving regulatory and rating agency environment.

Catastrophe Modeling

The insurance industry relies to a large extent on catastrophe models to manage catastrophe risk. Regulators and rating agencies recognize this fact by asking companies to justify their modeling approach. The underlying objective of such rules is to encourage companies to have a robust and consistent process to use modeling tools responsibly.

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February 3rd, 2016

Solvency Regimes: Third-Country Equivalence

Posted at 1:00 AM ET

Current capital requirements in the United States are set at a legal-entity level. Yet there are currently no global requirements for companies that operate in more than one country, and calculation formulas for capital requirements typically vary in each jurisdiction. Solvency II is the closest to mandating a group standard. Solvency II uses the concept of “equivalence” to deal with differing capital regimes between the European Union and the rest of the world including the United States, instead of forcing Solvency II standards on a third country.

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February 2nd, 2016

Addressing Own Risk and Solvency Assessment/Enterprise Risk Management and Insurance Capital Standard Globally

Posted at 1:00 AM ET

In accordance with the objectives of the National Association of Insurance Commissioners (NAIC) and European Insurance and Occupational Pension Authority (EIOPA), Own Risk and Solvency Assessment (ORSA) is “people and risk-centric,” primarily employing a principles-based approach, as opposed to a rules-based approach. This means that decisions on matters related to risks are largely based on the judgment of individuals relying on underlying facts, as opposed to decisions being made mostly by following intricate sets of rules. This is similar to the principles-based approach taken by International Financial Reporting Standards (IFRS). Although the calculation of the Solvency Capital Requirements (SCR) under Solvency II is rules based, like Insurance Capital Standard (ICS), Solvency II can be a “one size fits all” rules-based approach to capital, especially if the standard formula is used. (Re)insurers will need to find a way to incorporate ICS into their ORSA processes and the vehicle to accomplish this may be through the internal model.

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January 27th, 2016

Gaining Optimum Value from ORSA

Posted at 1:00 AM ET

Own Risk and Solvency Assessment (ORSA) was first introduced as a regulatory requirement as a result of Solvency II. (Re)insurers would be wise to take note of the many similarities between Solvency II and the National Association of Insurance Commissioners’ (NAIC) ORSA and, where possible, avoid reinventing the wheel when trying to implement them. Now, and especially with the introduction of the Insurance Capital Standard (ICS), it is increasingly important for (re)insurers to avoid unnecessary, redundant and duplicative activity in the attainment of regulatory satisfaction by striving for a uniform framework to establish risk management and controls, corporate governance, transparency and disclosures across borders. In so doing, (re)insurers will gain optimum value from their ORSA.

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January 26th, 2016

Managing the Demands of Global and Domestic Regulation

Posted at 1:00 AM ET

There is very little doubt that (re)insurers face and will continue to face growing regulation and scrutiny both domestically and internationally. Therefore, (re)insurers should seek the most effective and efficient way to meet the growing demands of increased global regulation. What follows below is a brief discussion of the overlap of some of these new global regulatory requirements and thoughts on how (re)insurers might go about approaching them.

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January 25th, 2016

Developments in Asia Pacific: Indonesia

Posted at 1:00 AM ET

The average balance of payments in Indonesian reinsurance transactions over the past five years has been in a deficit of IDR5.65 trillion (USD455 million) per year. This has been a point of frustration for the Indonesian government. As such, the Indonesia Financial Services Authority (OJK) has instructed insurers to retain more risk and to reinsure more business with domestic reinsurers, including the recently-formed state reinsurer, Indonesia Re, to “improve and optimize capacity in the country.” The OJK has also encouraged all domestic reinsurers to obtain an international rating in order to improve competitiveness with foreign reinsurers. However, it is anticipated that high cessions to other unrated, domestic companies will increase credit risk charges and pressure capital adequacy ratios.

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January 20th, 2016

Developments in Asia Pacific: Overview, Part II

Posted at 1:00 AM ET

Other countries, such as the Philippines and Indonesia, have instituted rules that may, conversely, impede the development of a healthy, profitable insurance market. The Indonesian regulator’s recent steps to reduce capital outflows, with a focus on reinsurance premiums ceded to international reinsurers, remain highly debated and will be explored in greater detail later. The Philippines, in addition to a risk-based capital (RBC) framework, has instituted a minimum paid-up capital requirement (starting in 2006 and revised in 2013) that increases every two years and will result in a PHP2 billion (approximately USD44 million) minimum threshold in 2020. This will put minimum capital levels in the Philippines well above those of more developed markets, including Australia, Japan and Singapore. The policy applies uniformly across the industry regardless of premium volume, line of business or geographic scope and therefore its impact is more strongly felt by smaller carriers that will most likely be forced out of the market or into the arms of larger players. The Philippines Insurer and Reinsurer Association (PIRA) has been outspoken against the minimum capital requirement and stated a preference for a standalone RBC metric.

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January 18th, 2016

Regulatory Developments in the United States: Group Supervision and ORSA

Posted at 1:00 AM ET

The National Association of Insurance Commissioners (NAIC) has stipulated that “the solvency framework of the U.S. system of state-based Insurance regulation has included a review of the holding company system for decades, with an emphasis placed on each insurance legal entity. In light of the 2008 financial crisis and the globalization of insurance business models, as discussed in this report, U.S. insurance regulators have begun to modify their group supervisory framework and have been increasingly involved in developing an international group supervisory framework (1).”

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