Posts Tagged ‘SCR’



March 6th, 2017

Solvency II: Greater Risk-Driven Management: Part II: Volatility

Posted at 1:00 AM ET

andrew-cox-95eagle_matthew-smeddy-vanbeneden-sm21 Andrew Cox, Managing Director; Matthew Eagle, Head of GC Analytics - International and Eddy Vanbeneden, Managing Director

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Another shortcoming of a single ratio is that it provides no insight into the resilience of an entity’s capital position. This became relevant when market volatility spiked in the first quarter of 2016 and companies disclosed how much their Solvency II ratios fell in the period.

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March 2nd, 2017

Solvency II: Greater Risk-Driven Management: Part I

Posted at 1:00 AM ET

andrew-cox-95eagle_matthew-smeddy-vanbeneden-sm21 Andrew Cox, Managing Director; Matthew Eagle, Head of GC Analytics - International and Eddy Vanbeneden, Managing Director

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On January 1, 2016, the Solvency II regulatory regime took effect. Some celebrated; others were weary from the months and years of preparation.

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November 21st, 2016

Reserving and Capital Setting: The Crystalization of Emerging Risks, Part II

Posted at 1:00 AM ET

The chart below attempts to illustrate the solvency calculation issue. Suppose the best estimate is 20 and the assessment from modeling is that the 1-in-200-year ultimate loss is 100. If all else stays the same and with the simplifying assumption that the yield curve stays flat, one can say that the sum of the 1-year solvency capital requirements (SCRs) approximated the difference between 100 and 20 (i.e. 80). Yet, because of the discounting, when in time the change in own funds is recognized, is important. The black line represents a linear recognition pattern so the 1-year SCRs are all equal with increments of 10. The blue line represents a Binary Fast recognition so the first year SCR is 80 and the remaining years’ SCR are zero. This means that the deterioration is recognized quickly. The red line again shows binary recognition but with a slow pattern as the movement is only occurring toward the end of the liabilities’ life. The two curves in light blue and light red represent less severe versions of the binary forms.

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October 26th, 2016

Solvency II: An Era of Greater Risk-Driven Management

Posted at 1:00 AM ET

andrew-coxeagle_matthew-smeddy-vanbeneden-sm

Andrew Cox, Managing Director; Matthew Eagle, Head of GC Analytics® - International; and Eddy Vanbeneden, Managing Director

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On January 1, 2016, the Solvency II regulatory regime took effect. Some celebrated; others were weary from the months and years of preparation.

Continue reading…

September 12th, 2016

Solvency II: Greater Risk-Driven Management

Posted at 1:00 AM ET

andrew-cox-95eagle_matthew-smeddy-vanbeneden-sm21 Andrew Cox, Managing Director; Matthew Eagle, Head of GC Analytics - International and Eddy Vanbeneden, Managing Director

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On January 1, 2016, the Solvency II regulatory regime took effect. Some celebrated; others were weary from the months and years of preparation.

Continue reading…

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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May 7th, 2015

Reinsurance Versus Subordinate Debt: Which is Best for Solvency Capital?

Posted at 1:00 AM ET

matt-day-headshot-sm5ross-milburn-pic-128x149smallMatthew Day, Senior Vice President, Guy Carpenter Strategic Advisory and Ross Milburn, Managing Director, GC Securities*, a division of MMC Securities (Europe) Ltd., which is authorized and regulated by the Financial Conduct Authority

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Here we review how a holistic approach to managing solvency capital requirements can benefit insurers’ bottom line: 

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April 30th, 2015

Reinsurance Versus Subordinate Debt: Which Is Best for Solvency Capital? Part III

Posted at 1:00 AM ET

matt-day-headshot-sm7ross-milburn-pic-128x149small2Matthew Day, Senior Vice President, Guy Carpenter Strategic Advisory and Ross Milburn, Managing Director,  GC Securities*, a division of MMC Securities (Europe) Ltd., which is authorized and regulated by the Financial Conduct Authority

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What About Volatility?

Insurers understand volatility in respect of their insurance and investment risk and reinsurance can play a significant role in controlling this. However, another form of volatility exists in respect of the pricing and availability of reinsurance and sub debt. To counter this clients are encouraged to consider multi-year reinsurance transactions, retroactive solutions and to explore sub debt issuance that by nature is long term. By staggering the end-dates of different transactions, a natural hedge against rising rates on line and debt market spreads can be created.

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April 29th, 2015

Reinsurance Versus Subordinate Debt: Which Is Best for Solvency Capital? Part II

Posted at 1:00 AM ET

matt-day-headshot-sm6ross-milburn-pic-128x149small1Matthew Day, Senior Vice President, Guy Carpenter Strategic Advisory and Ross Milburn, Managing Director,  GC Securities*, a division of MMC Securities (Europe) Ltd., which is authorized and regulated by the Financial Conduct Authority

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Increasing the Permanent Capital Available

Sub debt is an additional part of the capital tool kit available to insurers and can often be used to greater effect as part of a tailored solution than in isolation. In conjunction with a risk and/or capital management-based approach to the mitigation of each of the solvency capital requirement (SCR) components, management may consider issuing sub debt to provide growth capital (organic and through acquisition) as well as make a longer term contribution to SCR coverage.

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April 28th, 2015

Reinsurance Versus Subordinate Debt: Which Is Best for Solvency Capital? Part I

Posted at 1:00 AM ET

matt-day-headshot-sm5ross-milburn-pic-128x149smallMatthew Day, Senior Vice President, Guy Carpenter Strategic Advisory and Ross Milburn, Managing Director,  GC Securities*, a division of MMC Securities (Europe) Ltd., which is authorized and regulated by the Financial Conduct Authority

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In recent months a number of market commentators have opined on the merits of proportional reinsurance versus subordinated debt (sub debt), some favoring reinsurance solutions and some favoring sub debt, but generally finding results in line with the products their companies offered. Guy Carpenter feels reinsurance or sub debt alone is unlikely to provide the best solution to meet solvency capital requirements. Instead, a blended approach should be considered.

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