Annual Report - Scor

Current solvency regulations
In addition to the capital adequacy measures mentioned above,
further comfort is provided to clients through an independent
assessment by insurance regulators in the various countries across
the world where SCOR operates.
Regulators have implemented solvency regulations that stipulate
the methods or formulae for calculating the regulatory Required
Capital. The SCOR Group and its various legal entities and branches
satisfy all of the applicable regulatory requirements, the main ones
being Solvency I in the European Union, the Swiss Solvency Test in
Switzerland and Risk Based Capital (RBC) in the USA.
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Summary
of Solvency II
regulations
Pillar I – Capital requirements
(quantitative evaluation)
The Minimum Capital Requirement (MCR) represents the
lowest possible capital any (re)insurer should hold – anything
lower is considered to expose policyholders to unacceptable
risk. If the available capital falls below this level, the
supervisory authorities could intervene in order to restore the
solvency of the company to an acceptable level.
The Solvency Capital Requirement (SCR) accurately reflects
the risk profile of the company and incorporates quantifiable
risks faced by (re)insurers, including underwriting risk,
market risk, credit risk and operational risk. To calculate the
SCR the (re)insurer can choose either the Standard Formula
or an Internal Model (once the latter has been approved by
the supervisory authorities).
Annual Report SCOR 2009
Solvency II Regulations
In 2012, a major change will take place in the European insurance
industry, when the current solvency regulations will be replaced by
a new regime, Solvency II. One of the main changes involved
concerns the method of evaluating regulatory Required Capital,
which, in the future, will more closely reflect the actual risk profile
of a company.
Solvency II regulations are built upon three pillars: Pillar 1 - Capital
Requirements; Pillar 2 - System of Governance and Internal
Control; Pillar 3 – Disclosure and Reporting Requirements.
Pillar II – System of governance
and internal control (including qualitative
evaluation of risks and capital)
The underlying philosophy of Solvency II is a risk-oriented
solvency assessment based on the principle of proportionality,
i.e. more time and effort is spent managing significant risks
and some operational risks. For this reason, the concept of
ORSA (Own Risk and Solvency Assessment) has been
developed, whereby the (re)insurer carries out an assessment
of its own solvency needs in relation to its risk profile. If the
supervisory authority is of the opinion that the SCR calculation
based on the standard formula or internal model does not
sufficiently reflect the risk profile of the (re)insurer, or if there
are qualitative deficiencies, capital add-ons will be imposed.
Pillar III - Disclosure and reporting
requirements(to the markets
and to supervisory bodies)
The third pillar stipulates the disclosure requirements, the
main objective being to harmonise reporting procedures and
content across the European Community. Whether for the
general public or for the regulator, the documentation
involved will require a high level of transparency, including
impact studies, risk-oriented analysis and detailed,
standardised information.