Solvency II

Framework of Solvency II
  • 10 principles to better quantify insurance risks
  • MCR and SCR: Minimum Capital Requirement and Solvency Capital Requirement
Objectives of regulators
  • Modernise the prudential rules applicable to insurance companies
  • Reinforce the prudential framework and the convergence of monitoring practices with 3 objectives:
  • High protection of consumers
  • Sound competition between insurance companies
  • Reduction of the cost of regulation, especially for international groups
  • Validate objectives in spirit but also in practice
  • Validation of internal models
  • Role of the CEIOPS
  • Principles of mediation
  • Divergence with IAS standards
General approach of Solvency II
  • Analysis of the global balance sheet
  • Capacity of insurer to cover his liabilities
  • Economic valuation of assets and liabilities: mart-to-market and mark-to-model
  • Valuation principles of liabilities
  • Interaction between solvency margin, global allocation of capital and SCR
  • From a standard approach to internal models
Measuring risk and time-line in the standard approach
  • Notions of VaR and TailVaR
  • Risk classification
  • Investment risks (credit risk, market risk, concentration risk)
  • Risks inherent to the insurance industry (life/non-life, reinsurance risks/health, insurance policies pricing risk, provisions)
  • Operational risks
  • Risk aggregation
  • Risk mitigation techniques
  • Reinsurance
  • Securitisation and use of derivatives
  • Management of consolidated insurance groups
Best practice risk modelling
  • Market risks and ALM
  • Equity and real-estate
  • Fixed-income: duration
  • Index-linked products or capital-guaranteed products
  • Risks linked to life-insurance
  • Risk of increasing costs: fixed costs and kick-back
  • Risk of debt depreciation
  • Biometric risk
  • Risks linked to non-life insurance: importance of correlation analysis of diversified portfolios to aggregate risks
  • Credit risk
  • Simple factor model dependent on rating levels
Conclusion: challenges and limitations of current model

  • Validating the allocation of capital required to cover insurance risks
  • Understanding how risks are quantified in the insurance industry (life, health, non-life, natural disasters)
  • Linking Solvency II to the other reforms (IAS-IFRS, Basel II)
  • Mastering the market risk approach and the challenges in terms of asset allocation
  • Following up on any development of the Solvency II regulation
  • Generic presentation of Solvency II, comparison with the IAS-IFRS reform, description of the various risks to account for, detailed review of market risks, illustrated by practical current case studies
  • Continuous update on most recent regulatory developments
  • Focus on the practical consequences in terms of asset allocation for an insurance portfolio
  • Risk managers
  • Asset managers
  • Asset allocation managers
  • ALM managers for insurance companies
  • CRMs in charge of insurance companies
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