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SOLVENCY II and Reinsurance

SOLVENCY II and Reinsurance. General Overview. The 2nd International Istanbul Insurance Conference 30 th of September 2010 . Solvency II - Key Factors. Risk based approach Fair value basis

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SOLVENCY II and Reinsurance

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  1. SOLVENCY II and Reinsurance General Overview The 2nd International Istanbul Insurance Conference 30th of September 2010

  2. Solvency II - Key Factors • Risk based approach • Fair value basis • Reinsurance assets will be valued on BE basis allowing for an expected loss and accounting for reinsurer rating • Mitigating effect of reinsurance

  3. Solvency II - Comments The industry is still very much in favour of Solvency II But capital requirements under Solvency II have yet to be finalised, and larger insurers are growing concerned with the current proposed calibration With each wave of papers published by CEIOPS, the consultation peiod has become shorter, and insurers and regulators have limited numbers of qualified senior personnel available to respond appropriately. The industry is currently focusing on the cost of getting ready for Solvency II The function of reinsurance as a source of medium – and long term capital is clearly coming to the forefront of many reinsurance buying strategies. We are supportive of theprinciples, butthedevilis in thedetail. S&P sees reinsurers as being one of the principle beneficiaries under Solvency II, at least in the first few years of the new regime

  4. Solvency II

  5. Solvency II • Best Estimate • It must be calculated Gross and the BE ceded • Proporcional -> Full Benefit • XL : Adjustment net to gross • Direct and proporcional reinsurance • Only XL per risk and per Segment • New possibilities for proporcional reinsurance

  6. Solvency II • Cat Risks • Natural catastrophe Perils • Man Made (NEW)

  7. Natural Perils • Standardised scenarios • Based on Perils per country and Cresta zones (EQ, Storm, Hail…) • EEUU scenarios • It must be calculaded Gross and then calculate the reinsurance • Possibility of buying reinsurance for these scenarios

  8. Man Made Cat

  9. Catastrophes • Factor based Method

  10. Fixed Factors

  11. Next Steps • Preparing the figures

  12. Details • Do we have the information? • Where can we get the information from? • In which format do we have it? • Are the details reliable? • Can we exploit that information? • Do we have the information detailed by reinsurers and its ratings? • …..

  13. Details • YES -> Determine correctly our SCR • NO -> We will have many difficulties and we might be penalized by a major requirement of the capital

  14. Examples of needed details • Best Estimate (BEL) • Triangles with the major number of years for segment Solvency II • Premiums • Paid claims • Incurred claims • Expenses • Life – Accident • Variation of the net value of the least passive assets for several risks (mortality, longevity …)

  15. Examples of needed details • Reinsurance Estructure • Proporcional – very easy (Gross to Net) • Xl for risk only for segment • Average cost for claim • Number of claims • Priority / Limit • Balance and BE calculation for reinsurance and rating

  16. What can reinsurers do? • Proporcional reinsurance • XL per risk per segment • CatRisks: Programsbasedon SII scenarios • Reinsuracne Rating (Long Tail) • Risk transfer • Optimization of the use of reinsurance

  17. Thank you very much Teþekkür Ederim

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