1 / 18

CIA Annual Meeting

CIA Annual Meeting. LOOKING BACK…focused on the future. Groupe Consultatif Solvency II: Current Status. Rolf Stölting St. John's, June 29 th 2005. Session 5709. Overview over initiatives / working groups (Europe). EU Commission Internal Market DG Financial Institutions: Insurance.

noma
Download Presentation

CIA Annual Meeting

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. CIA Annual Meeting LOOKING BACK…focused on the future

  2. Groupe ConsultatifSolvency II: Current Status Rolf Stölting St. John's, June 29th 2005 Session 5709

  3. Overview over initiatives / working groups (Europe) EU CommissionInternal Market DGFinancial Institutions: Insurance Pillar I Life Pillar I Life Groupe Consultatiffounded 1978 as technical advisory institution for the EU Association of European actuarial associations Advisory Board Project team Pillar I Non-life Pillar I Non-life Pillar II Pillar II Pillar III Account. Pillar III Account. CEIOPS Committee of European Insurance and Occupational Pensions Supervisors28 countries: EU, Norway, Iceland, Liechtenstein Board Groups etc. Groups etc. Institut des Actuaires DAV Institute of Actuaries Consultative Panelappr. 17 named persons:CEA, Mutuals,Groupe Consultatifetc. CEA (Comité Européen des Assurances) Steering Group for Solvency II GDV FFSA ABI June 2005

  4. Time-Frame EU-Commission / CEIOPS 1st WaveCall forAdvice ProgressReport DraftAnswers TechnicalAdvice 2nd WaveCall forAdvice Draft Answers TechnicalAdvice ProgressReport 3rd WaveCall forAdvice ProgressReport TechnicalAdvice Draft Answers 31.10.04 28.02.05 30.06.05 31.10.05 28.02.06

  5. Solvency II Pillar I Pillar II Pillar III • Market discipline (transparency and disclosure) Quantitative assessment of solvency Supervisory control procedure Three-pillar approach similar to Basel II

  6. First Wave of Calls for Advice • Calls for Advice 1- 6 (Pillar II): • Internal control and risk management • General aspects of the supervisory process • Quantitative tools • Transparency of supervisory action • Investment management rules • Asset-liability management

  7. Second Wave of Calls for Advice • Calls for Advice 7- 12 (Pillar I): • Technical Provisions in Life Assurance • Technical Provisions in Non-life Assurance • Safety Measures • Solvency Capital Requirement: Standard Formula (Life and Non-life) • Solvency Capital Requirement: Internal Models (Life and Non-life) and their validation • Reinsurance (and other risk mitigation techniques)

  8. Second Wave of Calls for Advice • Calls for Advice 13 - 18 (Pillar I, Pillar II): • Quantitative impact Study and Data related Issues • Powers of the Supervisory Authorities • Solvency Control Levels • Fit and proper Criteria • Peer Reviews • Group and Cross-sectoral Issues

  9. Third Wave of Calls for Advice • Calls for Advice 19 – 23: • Eligible elements to cover the capital requirements (Pillar I) • Cooperation between supervisory authorities (Pillar II) • Supervisory reporting and public disclosure (Pillar III) • Procyclicality (Pillar II) • Small and medium sized enterprises (Pillar I)

  10. Pillar 1 – Quantitative requirements (1) • Increased level of harmonisation for technical provisions • Best estimate topped up with a risk margin • Solvency Capital Requirement (SCR) : • Reflects level of capital to absorb significant volatility of results and to give reasonable assurance to policyholders • If undertaking does not fulfil SCR, amount of capital covering the SCR has to be re-established in due time, based on concrete and realisable plan submitted to supervisor for approval. • Parameters calibrated in such a way that quantifiable risks to which insurer is exposed are taken into account • Based on amount of economic capital corresponding to a ruin probability of 0,5 % (VaR of 99,5 %) and a one year time horizon (working hypothesis) • Method for Standard formula not yet fixed

  11. Pillar 1 – Quantitative requirements (2) • Minimum Capital Requirement (MCR) : • Reflects level of capital below which ultimate supervisory action would be triggered. • Level of MCR will be set once quantitative impact studies have been performed • Possibility to be calculated in a simple and robust manner • MCR will have an absolute floor

  12. Solvency Capital Requirement Safety margin ontechnical reserves Pillar 1 – Quantitative requirements (3) • Solvency Capital Requirement as the main instrument of a two-tier system under normal conditions assets Technical reserves

  13. Additional levelsof intervention? Solvency CapitalRequirement (SCR) Equity capital available Pillar 1 – Quantitative requirements (4) Intervention of supervisory body Minimum Capital Requirement (MCR)

  14. Pillar 1 – Quantitative requirements (5) • Risk classification : • Based on IAA risk classification • Underwriting risk • Credit risk • Market risk • Operational risk • Liquidity risk • Not quantifiable risks will be taken into account in pillar 2 • Internal models : • May replace standard formula of SCR if validated • Validation criteria and process to be developed and harmonised • Partial use of models may be authorised

  15. Pillar 2 – Supervisory activities • Aim to identify insurers with financial, organisational and other features producing a higher risk profile • Increase level of harmonisation of supervisory methods, tools and powers • Broader scope than Basel II • Need for increased cooperation between supervisors combined with peer reviews

  16. Pillar 3 – Supervisory reporting and public disclosure • Supervisory reporting : • Harmonised reporting to supervisors • Goes beyond the notion of financial reporting rules, including different types of information a supervisor needs to perform his functions • Information normally not in public domain • Public disclosure : • Transparency and disclosure of information to public will serve to reinforce market mechanisms and discipline • Should be in line with IASB to reduce admin burden • Should be compatible with disclosure requirements of banking sector.

  17. Road to Solvency II • Draft proposal for Framework Directive: mid 2006 (Commission) • Implementing measures: in 2009 (?) • CEIOPS is primary advisor of Commission • CEIOPS advises through specific "calls for advice" (early, extensive, open consultation with market participants expected from CEIOPS) • Framework for Consultation made up by Commission • Commitment of Groupe Consultatif / IAA explicitly appreciated Source: MARKT/2506/04

  18. Thank you for your attention!

More Related