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System of Governance

System of Governance. Annet Evara. Agenda. 1. System of governance 2. Summary of industry survey on preparations for Solvency II (July 2010) 3. ORSA 4. Lessons learned on ORSA 5. Next steps 6. Q&A. 1. System of governance framework (Level 1).

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System of Governance

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  1. System of Governance Annet Evara

  2. Agenda 1. System of governance 2. Summary of industry survey on preparations for Solvency II (July 2010) 3. ORSA 4. Lessons learned on ORSA 5. Next steps 6. Q&A

  3. 1. System of governance framework (Level 1)

  4. 1. System of governance -OverviewGeneral governance requirements:- Article 41 • Proportionate to the nature, scale and complexity of operation • Adequate structure with clear allocation/segregation of duties • Written policies, prior approval by Board and annually reviewed • Continuity of operations and contingency plans

  5. 1. System of governance -OverviewFit and proper and proof of good repute:- Article 42 & 43 • Adequate qualifications, knowledge and experience • Good repute and integrity • Proof of good repute and/or no bankruptcy from a Competent Authority Applicable to Board and key persons Notify supervisor of changes to key persons e.g. from replacement......

  6. 1. System of governance -OverviewRisk management:- Article 44 • Establish an effective risk management function • Processes and procedures to identify, measure, monitor, manage and report all risks • Integrated into organisational structure and decision making • Cover risks included in SCR calculation and all other risks • Cover partial or full internal models

  7. 1. System of governance –Overview Functions:- Article 46, 47, 48 and 49

  8. 1. System of governance – Updates

  9. 1. System of governance – Updates Omnibus II proposal –systems of governance • EIOPA given power to develop binding standards on (Art 41-49, except 45) • Further guidance on Art. 45 (1) a may be provided b) Possibilityof transition - maximum period of 3 years from 1 January 2013: Article 41(1) and Article 41(3)

  10. 1. System of governance - Central Bank paper Corporate Governance Code • Effective January 1, 2011 (with extensions to June and Dec 31st) • Contains the minimum requirements for promoting strong and effective governance • Applicable to credit institutions and insurance undertakings (excludes captives) • Submit annual compliance statement to the Regulator (First submission for 2011 year end). • Developing guidance on the compliance statement

  11. 1. System of governance - Central Bank papersCorporate Governance Code - Consultation Paper 53 • Published April 29, 2011, consultation closes June 10, 2011 • Specifies the minimum requirements for promoting strong and effective governance, but tailored for the captives market • Applicable to captive insurers • Proportionality principle

  12. 1. System of governance - Central Bank papersFit and Proper- Consultation Paper 51 • Published March 22, 2011, consultation closes May 20, 2011 • Covers the standards of fitness and probity to be met by persons running the undertaking • Applicable to regulated entities except credit unions

  13. 2. Industry Survey on Preparations for Solvency IICompletion of gap analysis 88% response rate

  14. 2. Industry Survey on Preparations for Solvency IISummary of main gaps identified • ORSA main gap

  15. 2. Industry Survey on Preparations for Solvency II General comments on ORSA from survey.

  16. 2. Industry Survey on Preparations for Solvency IISummary of timelines to address gaps 76% plan to address their gaps in 2011

  17. 3. ORSAWhat is ORSA (Art 45)? • Firms own view of its risks and capital needs • Part of risk management • Board responsibility (top –down approach) • Defined “ the processes and procedures employed to identify, assess, monitor and report the risks and determine the own funds necessary to ensure overall solvency needs are met”...... CEIOPS ,Issue paper on ORSA, May 2008

  18. 3. ORSAORSA PROCESS

  19. 3. ORSA(II) Own assessment - minimum requirements

  20. 3. ORSA(II) Own assessment- Minimum requirements

  21. 3. ORSA(II) Own assessment- Minimum requirements

  22. 3. ORSA(III) Reporting ORSA results to supervisor • Results of ORSA reported as part of Regular Supervisory Reporting (RSR) • ORSA reporting will include: findings, conclusions and quantitative outcome of ORSA. This will be based on the internal ORSA documentation

  23. 3. ORSAKey issues to note • ORSA process vs ORSA reporting • Requires Board sign off • Should be performed at least annually or more frequent if risk profile changes • Internal documentation of the ORSA should be retained • Results of ORSA reported to supervisor.

  24. 4. Lessons learned on ORSA • Challenges • Potential benefits

  25. 5. NEXT STEPS • Dedicated Solvency II resources • Participation in EIOPA subgroup on governance (which includes ORSA) • Solvency II supervisory review approach on ORSA in progress • Solvency II Industry preparedness survey (July 2011)

  26. 6. Questions

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