Bit slow on the blog front at the moment, as I work through the Level 3s and construct a worthwhile opinion – slightly hampered by my new surroundings as well (Wifi doesn’t grow on trees sadly!). Updates to resume shortly in due course, but at the moment it’s all about the ORSA...
An online repository for Solvency II, ERM and Corporate Governance material and comment from the Principal of Governance Matters, an independent Risk Consultancy firm based on the Isle of Man.
Tuesday, 29 March 2011
Wednesday, 23 March 2011
Osborne and ABI make friends
ABI seem to be loving the Chancellor's work today on reducing UK tax on foreign derived profits. I suspect the Avivas and Prus of the world have a decent shot at thickening the bottom line and reducing capital requirements if they can get the branch structures right (though it was Aviva's share price that got the kicker at the end of the day).
On the Risk side, nice research released today by the Economist Intelligence Unit on emerging risk perceptions for 2011. Number of positive messages (from an albeit small respondent sample), but still woolly on the Solvency II-relevant pieces like risk appetite and scenario planning. I had read a profile about the top risk guy at Lego before, and he is cited in here as an early adopter of scenario analysis at board level, so may look him up again.
On the Risk side, nice research released today by the Economist Intelligence Unit on emerging risk perceptions for 2011. Number of positive messages (from an albeit small respondent sample), but still woolly on the Solvency II-relevant pieces like risk appetite and scenario planning. I had read a profile about the top risk guy at Lego before, and he is cited in here as an early adopter of scenario analysis at board level, so may look him up again.
Regulator and ratings agencies updates
Interesting that AM Best and Fitch have come out neutral after QIS5, with Fitch actively sponsoring restructuring in order to free-up capital with their public comments.
The FSA ponied up with their business plan for 2011-12. Preparation for a life less significant with the dual change of EIOPA being able to create BTS from 2013-ish as well as the coalitions plans for disbanding it. Strangely, not a lot about Sol II in the plan, which in this particular year seems odd, though they note that the increase in staff numbers has been done. They go for Special Project Fees of £34.3m for 2011/12 to be recovered from the industry.
On the other side of the pond, the Central Bank of Ireland have come out aggressively on the subject of poorly performing directors in the nationalised banks, reinforcing that the governance aspects of Sol II are very much in the here and now for UK and Irish corporates, regardless of the transitional periods mooted in Omnibus II.
The FSA ponied up with their business plan for 2011-12. Preparation for a life less significant with the dual change of EIOPA being able to create BTS from 2013-ish as well as the coalitions plans for disbanding it. Strangely, not a lot about Sol II in the plan, which in this particular year seems odd, though they note that the increase in staff numbers has been done. They go for Special Project Fees of £34.3m for 2011/12 to be recovered from the industry.
On the other side of the pond, the Central Bank of Ireland have come out aggressively on the subject of poorly performing directors in the nationalised banks, reinforcing that the governance aspects of Sol II are very much in the here and now for UK and Irish corporates, regardless of the transitional periods mooted in Omnibus II.
Wednesday, 16 March 2011
QIS5 - latest comment, and a reversal of fortunes
So the major consultants are now chipping in with their QIS5 reviews (see here, here and here), with some ambivalent ratings reviews thrown in by the agencies. No one saying anything new while simultaneously keeping the Pillar 2 preparation holes 'on the down low'.
Interestingly, while the implicit internal model advocacy was dealt this week, Generali ponied up today with a reduction in their Solvency II coverage from 187% to 160% over the year (p3 ref) . Driver was apparently spreads on Italian debt (which also drove their margin down at group level). Whilst their governance is notoriously patchy, their dislosure on strategy and capital allocation is phenomenal (this from their investor day in November [p5] is spectacular for Pillar 2 purposes). The reversal in fortune for Sol II coverage should not go unnoticed though.
I'll keep the eye on Pillar 1, but shift my focus towards the pre-consultation papers on the system of governance, terra firma for this consultant!
Interestingly, while the implicit internal model advocacy was dealt this week, Generali ponied up today with a reduction in their Solvency II coverage from 187% to 160% over the year (p3 ref) . Driver was apparently spreads on Italian debt (which also drove their margin down at group level). Whilst their governance is notoriously patchy, their dislosure on strategy and capital allocation is phenomenal (this from their investor day in November [p5] is spectacular for Pillar 2 purposes). The reversal in fortune for Sol II coverage should not go unnoticed though.
I'll keep the eye on Pillar 1, but shift my focus towards the pre-consultation papers on the system of governance, terra firma for this consultant!
Monday, 14 March 2011
QIS5 is in - some alarms, no surprises...
So EIOPA have finally coughed with QIS5, and to help myself as a non-actuary, I tweeted the component parts most interesting to me as a Pillar 2 man. Whilst I am not at all surprised to see respondents commenting that their ORSA and system of governance preparation is lacking, to see that around 5% do not currently meet the MCR is pretty sobering.
Perhaps what is of most concern , at a time where the UK and Irish regulators cannot get heads in the door quick enough, is that the headline is that Internal Models will probably bring your capital requirements down (or at least hold them steady). With even some industry sympathy for the FSA at conducting model assessments, one has to wonder how to reconcile the desire of the industry to receive the economic benefits with the practicality of handling the volumes - partial approvals by mid-2012 anyone?
Bringing this back to my discipline, the same problem has to be in the wings for ORSA assessment - unlimited word count, and explain each and every divergence. The difficulty for both parties of course is that there is not likely to be anything like an ORSA template, so to be both concise and complete will be quite a task.
Perhaps what is of most concern , at a time where the UK and Irish regulators cannot get heads in the door quick enough, is that the headline is that Internal Models will probably bring your capital requirements down (or at least hold them steady). With even some industry sympathy for the FSA at conducting model assessments, one has to wonder how to reconcile the desire of the industry to receive the economic benefits with the practicality of handling the volumes - partial approvals by mid-2012 anyone?
Bringing this back to my discipline, the same problem has to be in the wings for ORSA assessment - unlimited word count, and explain each and every divergence. The difficulty for both parties of course is that there is not likely to be anything like an ORSA template, so to be both concise and complete will be quite a task.
Sunday, 13 March 2011
Quick note on the blog
Just to let any early visitors know that this blog is in its infancy, and will rapidly populate over the next few weeks with materials which should help out anyone looking at Solvency II Pillar 2 preparation, or has a professional interest in Enterprise-wide Risk Management. I will either blog or tweet on releases in the meantime, in particular on the ORSA pre-consultation and QIS5 news.
Friday, 11 March 2011
More QIS5 previews
Nice of EIOPA to put the word out direct...via Reuters et al! Couldn't get it from EIOPA's site, for reasons unknown, but looks like no surprises have emerged, and the mooted recalibration for Property-Casualty and Cat Risk will still need to go ahead.
Just wondering with my macro-environmental hat on whether the natural disasters which have unfolded recently in Australasia and, only today, in Japan, make much of a dent in the lobbyists' hands when recalibration starts.
Just wondering with my macro-environmental hat on whether the natural disasters which have unfolded recently in Australasia and, only today, in Japan, make much of a dent in the lobbyists' hands when recalibration starts.
Thursday, 10 March 2011
QIS5 - Plus ca change...
Sounds like the murmurs were on the money - little change in standard model, and a nice summer of recalibration thanks to the cat risk module
And another one...
And the bills continue to roll in - Standard Life pitch up with a £64m bill (comment on p55), though split in an unspecified proportion with their transformation programme, which probably compares well against Aviva's £59m for Sol II exclusive cost (p16 for reference). While I will keep an eye out for further disclosures in general (didn't spot anything in Old Mutual for example, and couple more yet to announce), there is definitely some context to try and coax out of these pretty meaty numbers
Two and a half bills...
Interesting comment from the Pru today in their preliminaries on Solvency II progress, noting;
"We are engaging directly with our peers, politicians and regulators to ensure a fair and reasonable outcome before the regime becomes law."
For the £45m they have booked under 'Solvency II Implementation' in the IFRS result for 2010 (p37), they could have funded the 2010 UK election campaign for all parties and still had change left over to buy a nippy left winger for the company 5-a-side team.
As we have seen recently with the accounting treatment on the Keydata levy (try here, here, or here), when one is required to bust out expenses from the standard format, it is normally to make a point - judging by the quality of their actual results, I hope they feel it is money well spent!
"We are engaging directly with our peers, politicians and regulators to ensure a fair and reasonable outcome before the regime becomes law."
For the £45m they have booked under 'Solvency II Implementation' in the IFRS result for 2010 (p37), they could have funded the 2010 UK election campaign for all parties and still had change left over to buy a nippy left winger for the company 5-a-side team.
As we have seen recently with the accounting treatment on the Keydata levy (try here, here, or here), when one is required to bust out expenses from the standard format, it is normally to make a point - judging by the quality of their actual results, I hope they feel it is money well spent!
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