Lara Mowery, Managing Director and Julian Alovisi, Senior Vice President
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The 2010 hurricane season kicked-off on June 1 and the meteorological forces wasted no time in getting down to business. Tropical storm Agatha slammed into Central America, killing at least 101 people. The hurricane season kick-off and the storm occurred as backdrops to the wrap up of the June 1, 2010 reinsurance renewals, traditionally centered on the Florida property marketplace.

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David Lewin, Managing Director
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Austrian Supreme Court Confirms Free Choice of Attorney in Mass Claim Actions

Most Austrian insurers include a clause in their general conditions applicable to legal expenses insurance “that entitles the insurer, where the interests of several insured persons are directed against the same opponents, to limit its performance to the bringing of test cases, or where appropriate, to collective redress or other ways of asserting legal interests by legal representatives selected by it. (1)” This type of clause was developed in response to the risks arising from mass claim actions. It is therefore referred to as the “Mass Claim Clause.”

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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.

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. A separate consultation paper, CP 65, proposed specific implementation measures for approval of a partial internal model when it is used in conjunction with the Solvency II Standard Formula. Those specific implementation measures will be covered in a future briefing.

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

Solvency II - Approval of Internal Models:  Part II: The Approval Process >>

Solvency II - Approval of Internal Models:   Part III: The Approval Timeline, Approach for Group Internal Models & Conclusions >>

Solvency II - Approval of Internal Models:  Part IV:  Appendices >> 

Click here to read additional material about Solvency II >> 

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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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Eddy Vanbeneden, Managing Director
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This series concludes its review of the implementation measures described by CEIOPS regarding procedures to be followed for the approval of an internal model. The appendices are presented today.

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Eddy Vanbeneden, Managing Director
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This series continues its review of the implementation measures described by CEIOPS regarding procedures to be followed for the approval of an internal model.

4.   Approval timeline

When the application package for internal model approval is submitted, the regulator will have six months to approve the model or reject it. This period starts on the date when the application is considered complete and will be suspended while the regulator waits for any additional information or for any minor adjustment. It will be stopped when the regulator asks for any major or new modification or when the company decides to withdraw its model from the approval process.

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This series continues its review of the implementation measures described by CEIOPS regarding procedures to be followed for the approval of an internal model.

3. Approval process of internal models

The official form submitted by (re)insurers for approval of their internal model has many requirements:

• A rationale for the use of the internal model
• Results of a self-assessment of internal model readiness, mainly regarding Level 1 articles defining the use of internal models for Solvency II. This self assessment should cover a technical review of the internal model (scope, design, build, integrity and applications) and more particularly should define the following elements:

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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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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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Don 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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