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1、LON-MOW908INS-465LushanNaidooMiriamBellPreparing for Solvency II19November2009CONFIDENTIAL|1LON-MOW908INS-4652009OliverWAgenda 1.Executive Summary2.Why Solvency II?3.Structure three pillar approach4.Risk Management5.Own Risk and Solvency Assessment (ORSA)6.Implementing SII7.Case Study8.Next Steps9.Q
2、uestions2LON-MOW908INS-4652009OliverW Executive summary TheprinciplesofSolvencyIIhavealreadybeenagreedandthetechnicaldetailsarecurrentlybeingdebatedPlannedtotakeeffectfrom31October2012SIIisnotjustatechnicalcomplianceexerciseforactuaries,butariskmanagementtooltobeownedandimplementedbytheBoardandsenio
3、rmanagementTobeSIIreadywithinthenextthreeyearsrequiresaconsiderableamountofwork,andcompaniesshouldhavealreadystartedtheirimplementationprogrammesLON-MOW908INS-465Why Solvency II?Section24LON-MOW908INS-4652009OliverWSetthroughtwodirectivesinthe1970sArules-basedframework:Combinationofminimumcapitallev
4、els,restrictionson“risky”activitiesandtightregulatorycontrolThesolvencymarginisbasedonaprescriptiveformulaappliedtothetechnicalreservesandvalueatriskValuationofassetsandliabilitiesisnotbasedonamarket-consistentapproachbutratheronconservativeestimatesSupervisionbasedonconfidentialinformationanddiscre
5、et“guidance”SolvencyrequirementsarebasedonfactorswhichdonotreflectthesocietysriskprofileMarginforprudenceintheliabilityvaluationisnotprescribedandvariesbetweensocietiesDeterminedusinglocalstatutoryaccountsRestrictiveMaximumadmittedexposuretocertainassetclassesInconsistenttreatmentbetweenEUcountriesC
6、urrent Solvency I frameworkand its shortcomingsIntroduced 30 years ago, Solvency I is now outdated and not appropriate for the current market complexity5LON-MOW908INS-4652009OliverWImproveprotectionofferedtomembersIntroducerisk-based,marketconsistentapproachtosolvencycapitalassessmentEncourageandinc
7、entivisesocietiestounderstandandmanagetheirrisksEnsureconsistencybetweenfinancialmarkets(inlinewithBaselII)EstablishconsistentandcomparableregulatoryframeworkacrosstheEUEnhancedtransparencyandpublicdisclosureMeasureofsolvencywhichisdirectlylinkedtotheriskprofileofthesocietyRecognitionofriskmitigatio
8、ntools,subjecttospecifiedprinciplesSocietiesarerewardedforgoodriskmanagementandcontrolsTotalbalancesheetbasedaimstocapturetherisksonboththeassetandliabilitysidePrinciples-ratherthanrules-basedChoiceofcalculationmethodPrincipleofproportionalitySingledirectivetoapplytoall1societies,insurersandreinsure
9、rsacrosstheEU1.Excludes:SocietiesandInsurerswithgrossannualpremiumincome5MMandtechnicalprovisions25MM ,occupationalpensionschemesSolvency II objectivesNew features introduced by Solvency IISolvency II aims for transparency and consistency 6LON-MOW908INS-4652009OliverWPreparesadvicefortheEuropeanComm
10、issionandcollectsfeedbackfromindustryparticipantsRespondstothecalls for adviceandproducesconsultation papers.DraftversionsarecirculatedwiththeindustryandstakeholdersforcommentPossibleapproachesareroad-testedthroughanumberofQuantitative Impact Studies (QIS)Preparesframeworkdirectiveandimpactassessmen
11、tRequestsadvicefromCEIOPSthroughCallsforAdviceBothwillbebasedontheadviceandtheQISresultsreportsprovidedbyCEIOPSParticipantsincludeABIAFSCROForumCFOForumAllinsurancecompaniesCommentondraftconsultationpapersandonthedraftresponsestotheCallsforAdviceSubmitresultsoftheimpactstudiestonationalregulators.Na
12、tionalregulatorssubmitconsolidatedresultstoCEIOPSThe Solvency II framework is being developed in close co-operation with the European insurance industry CEIOPS(CommitteeofEuropeanInsuranceandOccupationalPensionSupervisors)European CommissionIndustry participantsLON-MOW908INS-465Structure three pilla
13、r approachSection38LON-MOW908INS-4652009OliverWSolvency II will adopt a three pillar approach Source:EuropeanCommission:“AmendedframeworkforconsultationonSolvencyII”,April2006.MARKT/2515/06Quantitative requirementHolistic requirementDisclosurePillar 1Pillar 2Pillar 3Methodforthecalculationofreserves
14、SolvencyCapitalRequirementSCRMinimumCapitalRequirementMCRValuationofassetsInternalmodelapprovalSystemofgovernanceSupervisoryreviewprocessSupervisoryinterventionsSupervisorydisclosurePublicdisclosureSolvency IILON-MOW908INS-465Pillar 1: Calculation methods10LON-MOW908INS-4652009OliverWPillar 1: Valua
15、tion of assets and liabilities based on the total balance sheet approachMarket Value of AssetsReservesSolvency Capital Requirement (SCR)Free AssetsMarket RiskCredit RiskOperational RiskUnderwriting Risk11LON-MOW908INS-4652009OliverWPillar 1: Solvency II offers a range of methods for demonstrating ad
16、equate financial resources, while the standard formula provides the benchmark 1.inthelargeEuropeanmarkets(DE,FR,UKetc.)(Source:OliverWymanestimate)2.SocietiesandInsurerswithgrossannualpremiumincome5MMandtechnicalprovisions60%) arise from the final 35%of SII-related investmentLON-MOW908INS-465Next st
17、epsSection837LON-MOW908INS-4652009OliverWSolvency II vision, gap analysis and business case are the foundation for the programme planFramework and programme design and managementGap analysis2009201020112012Capital modellingRisk governanceRisk-based steeringRegulatoryinteraction and complianceOngoing
18、 programme governance & managementExternal communicationOperating modelCapital model design(Internal) model build and roll-outOrg. & gov. design and implementationMetric designPilot a. refinementsEmbedding: Strategic planning and capital allocationData & IT standards def.Review of BU data & ITImprov
19、ement of current IT capabilitiesModel validationRegulatory approvalDesign a. development of risk reportsEmbedding: Product design and pricingEmbedding: Asset managementEmbedding: ReinsuranceOwn risk and solvency assessmentPreparation of regulatory reviewOngoing dialogue on requirementsDesign of regu
20、latory reportingDesign of external disclosureImplementation of external rep.Pillar 1Pillar 2Pillar 3Vision a. blueprintProgramme design a. set-upOngoing monitoring of requirements and communication with regulatorRisk appetiteLimit settingDesign of end-to-end processesSolution designIt is important t
21、o start your Solvency II programme now starting too late will significantly increase cost(as observed in Basel II)Vision setting, gap analysis, blueprinting and programme structuring must be based on an assessment of business impact38LON-MOW908INS-4652009OliverWRecommendations for your Solvency II p
22、rogramme planning and deliveryDesignyourSIIprogrammewithanunderstandingofbusinessimpactsandbusinessbenefitstobecapturedVisionsettingasimportantasgapanalysisShouldbeconductedorstartednowLayoutaclearbusinesscase,showingcostsandbenefitsofwhatyouareplanningtodoMakekeyoutputsoftheSIIreadinessprogrammetan
23、gibleearlyonAssignclearbusinessownersforeachofthekeySIIdeliverablesandensurethatresourcestodeliverareinplaceDontunderestimatechangemanagementtheworkofexplainingandconvincingneverendsandeveryaudienceneedsadifferentanglePlanandmanagetheprogrammecarefullymanagementofdependenciesisakeycomplexityweobserv
24、e39LON-MOW908INS-4652009OliverWConclusionSIIisfoundedonriskbasedprinciplesPillar2mostimportant,mostchallenging,mosttimeandeffortExtraworknowwillreaprewardsoverlongtermThinkhowfaryouvecomeinlast3years!LON-MOW908INS-465Questions?Section941LON-MOW908INS-4652009OliverWOliver Wyman contact detailsLushan NTel:01372389635Miriam BTel:0137238962742LON-MOW908INS-4652009OliverW
