Countdown to Solvency II

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IMAP on the horizon

A short while ago, there were doubts in some quarters as to whether Solvency II would ever be fully implemented. However, following the resolution of key components of the Directive and the Omnibus II vote in Q1 this year, implementation is finally on the horizon. For firms seeking day 1 full or partial internal model approval, a 1 January 2016 implementation date means there is limited time left to complete the work that needs to go into the Internal Model Approval Process (‘IMAP’) application. This month’s post is therefore about the IMAP submission and some insights to support you on your journey.
Posted on Thursday Oct 16

What does your ORSA mean to you?

Article 45 of the Solvency II Directive has been much talked and written about since we embarked on the journey towards Solvency II implementation several years back. Within the article is the Own Risk and Solvency Assessment, or ORSA, which remains one of the key focus areas for many insurers and regulators in the lead up to SII Go-Live in January 2016. Indeed the ORSA has been adopted by many global non-EU regulators, in the US and Canada for example, who presumably have seen the principled benefits the ORSA can bring to organisations and their stakeholders.
Posted on Thursday Aug 28

Pillar 3 - Reporting and Disclosure

One of the boldest elements of the forthcoming SII regime is surely the goal of targeting consistent, efficient and transparent public and private reporting across the sector - both annually and quarterly. Pillar 3 is now at the forefront of most insurers’ minds given its wide reaching implications and dependencies on the wider SII framework. The good news is that there is still some time remaining until the first annual interim reports are due (for threshold firms) which should give organisations the ability to take stock of their SII programme and continue to iterate much what has already been developed.
Posted on Monday Aug 18

Your competitors meet the use test already – do you?

So, your internal model has been specified, designed, built, tested and validated (hopefully in approximately that order). Your Board has been through a series of training sessions designed to help them to distinguish between a non-Gaussian copula and a negative binomial. But now you have to demonstrate how your model is actually used to inform real business decisions. Yes, you have to pass the “use test”.
Posted on Monday Jun 9

Insurers…. Ready! Regulators….. Ready!

1st January 2016 is getting closer. While a year ago Solvency II implementation date seemed uncertain and far away, now we know when, why and what. However, what remains unclear is the ‘where’. Where are insurers in their Solvency II journey? Where are they prioritising their remaining efforts? Where do they need to step up? To answer this, PwC recently conducted a series of meetings across 40 London Market (and Lloyd’s) insurers to establish the degree of Solvency II readiness.
Posted on Thursday May 29

Proportionality - knowing when enough is enough

Proportionality is supposed to be fundamental to Solvency II – yet it is perhaps the most misunderstood concept of all. In particular how to reconcile the need to demonstrate that you meet all the relevant requirements, all of the time, against the suggestion that proportionality is essential. Recital 19 sums up the idea quite neatly: “This Directive should not be too burdensome for small and medium-sized insurance undertakings. One of the tools by which to achieve that objective is the proper application of the proportionality principle. That principle should apply both to the requirements imposed on the insurance and reinsurance undertakings and to the exercise of supervisory powers.”
Posted on Thursday Mar 27

Model Validation – how high is the hurdle?

One of the bravest features of Solvency II is its attempt to create regulations that encompass the entire insurance industry, from the very largest global groups to some of the smallest domestic insurers, including life and non-life insurers and reinsurers, captives and monolines. As a result, some of the rules can appear a little bit vague or unclear. One of the most common questions is “what does this mean for me”. Model validation is a good example – there are almost as many approaches and practices as there are models to be validated. I thought it was time to make an equally brave, and hopefully helpful, attempt to pick out the essential features of validation.
Posted on Wednesday Mar 26

The Solvency II scenario you forgot to plan for

At their industry briefing shortly before Christmas, the PRA announced that, as part of preparations for Solvency II, they expect to receive an ORSA from every insurer during the course of 2014. Many firms have made good progress in developing their ORSA processes and reporting already, though all admit that more needs to be done.
Posted on Wednesday Feb 26

Solvency II – How to remobilise

With Solvency II back on the agenda, and a start date barely more than two years away, all insurers have to work out how to remobilise their programmes. Across the market, insurers are recognising that they have much still to do, and also that it is not as simple as “picking up where you left off”.
Posted on Thursday Nov 28

ICAS+ - getting closer and closer to Solvency II?

Across the market, both the PRA and FCA have been stepping up their activities over recent months, whether through risk reviews, thematic reviews or increased use of the “Section 166” (“Skilled Person’s Report”) tool. Following some initial confusion, the PRA’s Individual Capital Adequacy Standards plus (“ICAS+”) regime, which allows insurers to use their Solvency II work to meet current ICAS requirements, is also now beginning to establish an identity that takes it well beyond previous ICA exercises.
Posted on Thursday Sep 26

Don’t wait for the rules... get ahead of the game

Many insurers have expressed their frustration at continued delays to Solvency II, and consequent rule uncertainty. In this blog, I argue that these delays provide a real opportunity to minimise the impact of SII, at least in areas such as governance and risk management. And that certain existing standards and documents provide a really good guide to what “good enough” might look like.
Posted on Thursday Aug 29

A new interpretation of “proportionality”?

CSFI’s “Insurance Banana Skins” survey has once again highlighted that increased regulation is felt to be the biggest single issue facing insurance companies. Of course, it is not just a matter of Solvency II – there are regulatory changes taking place across the globe (including in the US, South American, Africa and Asia), whilst in the UK, the activities of the FCA will be just as influential for many insurers. But it is the progress of the FSB’s measures for global systemically important insurers (G-SIIs) that point the way towards a different regulatory future for at least some firms.

Posted on Thursday Jul 25