Don Mango, Chief Actuary
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According to the draft European Union Solvency IIc directives, companies will need to provide an “own risk and solvency assessment” (ORSA). The Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) has prepared an issues paper that provides guidance to assist (re)insurers in implementing the ORSA.
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.
Chris Klein, Guy Carpenter’s Head of Business Intelligence, comments on his view of the proposed new capital requirements for European insurers under Solvency II. Higher amounts of capital required are proposed along with higher quality of capital.
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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.
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.
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.
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”.
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.
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.
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.
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 >>
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.
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.
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.
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:
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.
