Answers to the European Commission on the ... - Eiopa - Europa

More documents

Recommendations

Info

Pillar II review of capital adequacy 10.165 CEIOPS is aware that <strong>the</strong> way of arriving at <strong>the</strong> actual SCR for <strong>the</strong> individual undertaking is a consequence of 'policy on solvency capital'. 10.166 The adequacy of <strong>the</strong> insurer's policy on solvency capital should be assessed by supervisory authorities using Pillar II supervisory powers as described in CEIOPS’ Answer <strong>to</strong> CfA 14. 10.167 An add-on measure, materialised in a requirement of an 'adjusted SCR', may be envisaged as part of Pillar II measures, <strong>to</strong> be applied on insurance undertakings with a deficient 'policy on solvency capital'. Legal considerations should be studied, especially for those Member States where regulations require precise and clear definitions for creating higher individual solvency requirements. Having in mind <strong>the</strong> legal environment in <strong>the</strong>se countries, a list of situations and actions <strong>to</strong> apply add-on measures under Pillar II may be desirable as part of level 2 or level 3 implementing measures. 10.168 When risks are not captured or captured insufficiently by <strong>the</strong> Pillar I calculation an 'adjusted SCR' may also be envisaged as part of Pillar II measures. 10.169 However, where a supervisory authority concludes that <strong>the</strong> insurer has deficiencies and failures in <strong>the</strong> systems and controls (including in internal control and/or risk management, or in <strong>the</strong> governance and market conduct qualitative requirements) of a nature and scale that fall below minimum standards and where financial loss may result, CEIOPS advises, that it may adjust <strong>the</strong> SCR <strong>to</strong> reflect this increased risk while <strong>the</strong>se deficiencies are being rectified. 10.170 CEIOPS clearly recognises that <strong>the</strong> imposition of an adjustment in <strong>the</strong>se circumstances is not a means of solving <strong>the</strong> issue, which must be addressed via o<strong>the</strong>r supervisory <strong>to</strong>ols, but of covering <strong>the</strong> additional risk in <strong>the</strong> meantime. However, supervisory authorities <strong>to</strong>ge<strong>the</strong>r with <strong>the</strong> insurance undertakings must ensure that in an agreed time frame <strong>the</strong> insurance undertaking remedies <strong>the</strong> causes for <strong>the</strong>ir additional risks, so that <strong>the</strong> adjustment can be diminished afterwards. 112
Call for Advice No. 11 Solvency capital requirement: internal models (life and non-life) and <strong>the</strong>ir validation Extract from <strong>the</strong> Call for Advice: The scope of this Call for advice is broad. The issues can be classified in three different areas (with different expertise requirements) as follows: 1. From a management point of view: integration of <strong>the</strong> internal model and internal processes, including management, business planning, investment, actuarial, underwriting, risk management, ect., processes, as well as <strong>the</strong> interlinkage and communication between <strong>the</strong>se processes. 2. From an information technology point of view: <strong>the</strong> use of sound methods (e.g. project management), technical platform (e.g. software, interfaces), databases, documentation, testing ect. 3. From an actuarial point of view: ma<strong>the</strong>matical modelling of risks and parameter estimation, including: - appropriate, documented and tested ma<strong>the</strong>matical, statistical, financial, economics and simulation models and methods - statistically tested parameters and analysis of data (including robustness and sensitivity anaylsis - in a going-concern approach assumptions (balance sheet and profit and loss items including risk-sharing features for <strong>the</strong> next year) should be in-line with <strong>the</strong> forecasts used internally in <strong>the</strong> company (budget ect.) … The <strong>Commission</strong> Services would like CEIOPS <strong>to</strong> give technical advice on appropriate EU standards for calculating <strong>the</strong> SCR by an internal model and on <strong>the</strong> compliance criteria for model validation and approval by <strong>the</strong> supervisor. … Background 11.1 An article on internal models and <strong>the</strong>ir approval (N10-N11 in document (MARKT/2539/03) could be developed along <strong>the</strong> following lines: “The solvency capital requirement may be calculated by an undertaking’s own internal model after validation and approval by <strong>the</strong> competent authorities. The risk measure, <strong>the</strong> time horizon and <strong>the</strong> 113
Page 1 and 2:
CEIOPS-DOC-07/05 Answers</s
Page 3 and 4:
Style convention The following has
Page 5 and 6:
• Safety measures (CfA 9); • So
Page 7 and 8:
sole purpose is to
Page 9 and 10:
Call for Advice No. 7 Technical pro
Page 11 and 12:
one year). Therefore, capital requi
Page 13 and 14:
perhaps through an explicit additio
Page 15 and 16:
Discounting 7.22 The present value
Page 17 and 18:
exposed to risk fr
Page 19 and 20:
insurance liabilities set by refere
Page 21 and 22:
Profit sharing In practice, for uni
Page 23 and 24:
future cash flows will have <strong
Page 25 and 26:
Explanatory text S
Page 27 and 28:
always have resources to</s
Page 29 and 30:
developed. They would help
Page 31 and 32:
8.28 A fourth option could be envis
Page 33 and 34:
In principle, "the
Page 35 and 36:
8.48 Three alternatives can be cons
Page 37 and 38:
essential part of the</stro
Page 39 and 40:
statistical estimate (with a level
Page 41 and 42:
8.77 It may be argued that
Page 43 and 44:
to use more sophis
Page 45 and 46:
consequence on the
Page 47 and 48:
8.105 In some cases, the</s
Page 49 and 50:
This shall be reviewed, at least an
Page 51 and 52:
ut the exposure <s
Page 53 and 54:
Explanatory text M
Page 55 and 56:
9.15 Solvency II could also employ
Page 57 and 58:
9.28 The life formula yields itself
Page 59 and 60:
underestimate them
Page 61 and 62: 'Prudent person plus' approach 9.52
Page 63 and 64: Uniform or different rules for tech
Page 65 and 66: through a prescribed list. Lists ar
Page 67 and 68: addition a range of stresses so tha
Page 69 and 70: (including the Rei
Page 71 and 72: for review of the
Page 73 and 74: eligibility criteria, or principles
Page 75 and 76: should not lead to
Page 77 and 78: • the degree of
Page 79 and 80: 9.156 The senior management shall r
Page 81 and 82: - going-concern aspects of business
Page 83 and 84: features. 81 TailVaR is an example
Page 85 and 86: 10.17 The SCR should also reflect <
Page 87 and 88: 10.26 The risk of asset liability m
Page 89 and 90: Naturally, the pra
Page 91 and 92: too few categories
Page 93 and 94: - Choice of volume measures 10.57 W
Page 95 and 96: Underwriting risk in non-life insur
Page 97 and 98: volatility of thei
Page 99 and 100: those insurers this possible increa
Page 101 and 102: 10.103 A factor-ba
Page 103 and 104: 10.112 Assessing whethe</st
Page 105 and 106: 10.121 The SCR should deliver a lev
Page 107 and 108: whenever its effects on the
Page 109 and 110: scenario techniques to</str
Page 111: Operational risk just ratings infor
Page 115 and 116: Costs and Benefits 11.6 It should b
Page 117 and 118: • Qualitative requirements for <s
Page 119 and 120: 11.19 Risk management criteria set
Page 121 and 122: individual undertaking is exposed a
Page 123 and 124: • sensitivity analyses that have
Page 125 and 126: • visualizations of flows of prod
Page 127 and 128: Partial models and the</str
Page 129 and 130: 11.58 There should be few descripti
Page 131 and 132: of the SCR estimat
Page 133 and 134: equirements to imp
Page 135 and 136: Call for Advice No. 12 Reinsurance
Page 137 and 138: Reflection in technical provisions
Page 139 and 140: • provide an estimate of an under
Page 141 and 142: particular reinsurer(s)’ aggregat
Page 143 and 144: they auto<
Page 145 and 146: einsurer to <stron
Page 147 and 148: should be a reduction in risk regar
Page 149 and 150: Call for Advice No. 13 Quantitative
Page 151 and 152: • the process of
Page 153 and 154: • handling questions from insuran
Page 155 and 156: member countries and in the
Page 157 and 158: components of the
Page 159 and 160: Background 14.1 Current insurance D
Page 161 and 162: 14.12 In order to
Page 163 and 164:
groups in its answer to</st
Page 165 and 166:
affected; • Impose restrictions o
Page 167 and 168:
14.43 Regarding the</strong
Page 169 and 170:
off all contracts; • to</
Page 171 and 172:
Call for Advice No. 15 Solvency con
Page 173 and 174:
Minimum capital requirement (MCR) D
Page 175 and 176:
adjusted SCR. From a purely technic
Page 177 and 178:
to be implemented.
Page 179 and 180:
capital
Page 181 and 182:
absolute floor (expressed in euros
Page 183 and 184:
Bolkestein agreed to</stron
Page 185 and 186:
16.14 Generally speaking, complianc
Page 187 and 188:
appoint an additional person <stron
Page 189 and 190:
16.28 It should also be noted that
Page 191 and 192:
Time of application 16.41 The asses
Page 193 and 194:
of the individual
Page 195 and 196:
Background 17.1 This document aims
Page 197 and 198:
Review Panel would be a permanent g
Page 199 and 200:
• the developmen
Page 201 and 202:
asis for considering improvements <
Page 203 and 204:
(I) Regulatory arb
Page 205 and 206:
(II) Capital requirements at group
Page 207 and 208:
into a SCR at grou
Page 209 and 210:
18.31 Additionally, it must be deci
Page 211 and 212:
Capital requirements 18.39 The Fram
Page 213 and 214:
(III) Supervisory Review Process of
Page 215 and 216:
18.60 In view of the</stron
Page 217 and 218:
new structure would need to
Page 219 and 220:
future Framework Directive. CEIOPS
Page 221 and 222:
18.94 Model validation in t
Page 223 and 224:
the assumptions us
Page 225 and 226:
Annexes Annex A (Call for Advice No
Page 227 and 228:
pursuing a strategy which t
Page 229 and 230:
Specific principles for non-life in
Page 231 and 232:
Conformity, suitability and suffici
Page 233 and 234:
• existence of significant insuff
Page 235 and 236:
A.64 In the tests
Page 237 and 238:
the rules on <stro
Page 239 and 240:
TVaR1-α for Tail Value-at-risk. In
Page 241 and 242:
Degree of personalisation B.24 Tran
Page 243 and 244:
B.34 There are two approaches <stro
Page 245 and 246:
Segmentation B.44 In general terms,
Page 247 and 248:
technical technical technical techn
Page 249 and 250:
B.61 The second alternative was cho
Page 251 and 252:
Dutch supervisory authority for <st
Page 253 and 254:
Market risk Equity risk this altern
Page 255 and 256:
B.95 In a scenario-based approach,
Page 257 and 258:
B.106 As an alternative one could t
Page 259 and 260:
where: KTSA = the
Page 261 and 262:
Results from the a
Page 263 and 264:
Solvency ratio prior to</st
Page 265 and 266:
Number of instances Risk group Deta
Page 267 and 268:
Conclusion In general, the<
Page 269 and 270:
where: TP gross = technical provisi
Page 271 and 272:
premium risk, the
Page 273 and 274:
“While proportional reinsurance t
Page 275 and 276:
contribute with any additional info
Page 277 and 278:
E.29 Another way <
Page 279:
programmes on the
show all

Answers to the European Commission on the ... - Eiopa - Europa

Create successful ePaper yourself

Delete template?

Save as template?