Wednesday 25 May 2011

More excellent Solvency II materials

"Reassuring expensive" - not a bottle of Stella Artois, but subscription to InsuranceERM, who continue to produce cracking material to help validate your Solvency II approach on all three pillars. I picked out the following from last week (sign up for trial to view if you don't subscribe).

Dutch problems under Solvency II - Fitch ratings provide the research this time on Dutch preparedness for Solvency II. It highlights a couple of items; that AEGON and ING will be praying for the USA equivalence assessment to be successful (both of course have received state help on the capital front recently, so will be light on that front), and that secondly there would be a maximum of 12 Internal Model applicants, and potentially even less, due to resource scarcity.

CRO at Torus on his Solvency II approach - As a new company, he notes that the benefits of not having to incorporate legacy systems into the data warehouse is somewhat negated by the lack of historical data in producing the calculation kernel (relying on a deterministic approach in some areas). Very interested to see his approach to addressing the use test, which is by performing gap analysis between current and future state in 12 areas where model output could potentially be used.
Solvency II Balance Sheet volatility challenges - succinctly lists responses to the volatility expected when performing market consistent valuation as "raise capital, hedge, or change product lines". While UK already values in market consistent manner under IFRS, this will introduce SCR volatility across the continent. Makes a nice distinction between short and long term liabilities, and the ease of capitalising the former with reduced spread risk. Also suggests that asset-liability matching will become a more exact science across the board.

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