With the transition from Solvency I to Solvency II, insurers have to contend with a more complex and comprehensive risk management framework than just premiums and reserves. This new framework encompasses the full range of risks exposing a (re)insurance portfolio, including an examination of existing risk mitigation frameworks.
Insurers are more heavily focused on reviewing their diversified risk profile with more active risk and portfolio management, with each portfolio segment examined on its own merit.
The stronger focus on risk management is pushing (re)insurers to review the varying contributions to capital needs and earnings. For those companies that have decided to develop an internal model, the alignment with all requirements can be challenging. There is a need to provide a clear view of the risk for a range of risk classes not just limited to the most obvious.
Solvency II is not limited to the calculation of the required capital. It creates an environment for a more global and robust approach to risk, from risk selection and pricing to capital needs and allocation.
Link to Part I>>
Link to Part II>>
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