Preparing for Solvency II

Course Overview

Solvency II is the proposed EU directive which harmonises the regulation of insurance companies in Europe and introduces new capital adequacy rules to cover risk and potential liabilities.

The idea behind the new rules is to align capital requirements with actual risk. The rules will be implemented by the end of 2012.

This course will focus on the practical implementing challenges that insurers are likely to face. In addition, we will examine new accounting rule changes for the insurance sector and the resultant data requirements necessary both to comply with the insurance and accounting regulatory changes.

Topics covered include:

• The three pillars of Solvency II, quantitative requirements, supervisory review and disclosure
• The impact of Solvency II on the insurance market – how the landscape is likely to change
• Preparing and interpreting the new ‘economically relevant figures’
• Diversification – Impact on large and small firms

Course Content

Solvency Capital Requirement

• Non-life underwriting risk
• Special health underwriting risk
• Market risk
• Credit/Operational Risk

Purpose of Solvency Requirements

• Reduce risk of insurer not meeting claims
• Reduce losses suffered by policy holders
• Early warning for supervisors
• Confidence in financial stability of insurance sector

Basel 2 v Solvency 2

• Pillar 1 Quantitative requirements
• Pillar 2 Governance and risk management
• Pillar 3 Disclosure and transparency requirements

Leverage and Gearing

• Benefits of high gearing
• Corporate Finance financing guidelines
• Incentive schemes that encourage high gearing
• Volatility and capital requirements

Three Pillars of Solvency II

• Pillar 1 consists of the quantitative requirements (for example, the amount of capital an insurer should hold).
• Pillar 2 sets out requirements for the governance and risk management of insurers, as well as for the effective supervision of insurers.
• Pillar 3 focuses on disclosure and transparency requirements.

Hypothetical Regulatory Basis

• Liability Measured using Risk Free Rate
• Liability Measured using Asset Based Rate
• Embedded Value Approach

New developments in regulation

• Anticipation of future adverse events
• Historical data trends
• Liability risk
• Market, credit and operational risk

Causes of Failure

• Poor management,
• Inappropriate risk decisions
• Case Study Equitable Life
• Shortfalls in pricing models

Type of Models

• Standard Model
• Internal Foundation
• Internal Advanced models
• Supervisory role

Disclosure Requirements

• Own Risk and Solvency Assessment (ORSA)
• Solvency and Financial Condition Report (ORSA)
• Market risk disclosures
• International Financial Reporting Standards disclosure

Delivering this course in-house for you to a number of participants could be very cost effective. Please call us on 020 7387 4484 to discuss this further.

If you have any questions about this seminar please write to us at post@redcliffetraining.co.uk.