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

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Staff that fully understands <strong>the</strong> risk covered in <strong>the</strong> policies 8.127 The insurer must ensure that <strong>the</strong> staff assessing and valuating <strong>the</strong> technical provisions adequately understands <strong>the</strong> risks covered by and associated with each contract. 8.128 Proper internal control procedures should be developed regarding <strong>the</strong> staff dealing with technical provisions, through an appropriate segregation of duties, namely regarding <strong>the</strong> reporting, assessment and processing of claims. Actuarial function regarding technical provisions 8.129 The actuarial function plays an essential role in <strong>the</strong> proper assessment of <strong>the</strong> technical provisions. 8.130 Insurance undertakings are required <strong>to</strong> ensure that <strong>the</strong>y take competent and appropriate actuarial advice in<strong>to</strong> account when making <strong>the</strong>ir decisions on provisioning. CEIOPS is aware that <strong>the</strong> actuarial function will likely include also o<strong>the</strong>r areas like capital adequacy or business strategy.. Competent means from a person with <strong>the</strong> expertise, experience, and personal skills commensurate with <strong>the</strong> complexity and risk of <strong>the</strong> undertaking's business (see Annex A <strong>to</strong> CfA 16 on Fit and Proper). The advice should be appropriately independent of <strong>the</strong> Board. 8.131 External audi<strong>to</strong>rs should have an independent oversight from <strong>the</strong> Board of Direc<strong>to</strong>rs and should have <strong>the</strong>ir own actuarial function or have access <strong>to</strong> actuarial advice independent of <strong>the</strong> actuarial function advising <strong>the</strong> Board of Direc<strong>to</strong>rs. This is in order <strong>to</strong> allow assessing internal actuarial analysis. 8.132 Supervisory authorities assess whe<strong>the</strong>r <strong>the</strong> insurance undertaking's actuarial function has sufficient expertise, experience, and personal skills for <strong>the</strong> supervisor <strong>to</strong> rely on its assessment. They check that this function is appropriately segregated and not subject <strong>to</strong> any nontechnical influence by <strong>the</strong> Board of Direc<strong>to</strong>rs and/or Senior Management. 57 8.133 The objectives of <strong>the</strong> actuarial function within insurance undertakings should be harmonized. 58 . Reinsurance arrangements 8.134 Suitable systems should be in place <strong>to</strong> ensure that reinsurance recoveries are identified and appropriately recorded on a timely basis. 8.135 There should be guidelines for assessing credit risk in technical provisions for amounts recoverable (including amounts contingently recoverable) under reinsurance arrangements. (This also relates <strong>to</strong> CfA 12). The risk that <strong>the</strong> insurer will not be able <strong>to</strong> pay <strong>the</strong> claims as <strong>the</strong>y fall due because of insufficient reinsurance is an insurance related risk, 50
ut <strong>the</strong> exposure <strong>to</strong> <strong>the</strong> reinsurer is a counterparty risk. Reporting <strong>to</strong> Senior Management and <strong>the</strong> Board of Direc<strong>to</strong>rs 8.136 The risk management and internal control should include procedures of reporting, namely, of <strong>the</strong> actuarial function, <strong>to</strong> <strong>the</strong> Board of Direc<strong>to</strong>rs that shall describe <strong>the</strong> level of compliance with <strong>the</strong> rules proposed by CEIOPS for <strong>the</strong> valuation of technical provisions. 51
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: This shall be reviewed, at least an
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
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10.103 A factor-ba
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10.112 Assessing whethe</st
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10.121 The SCR should deliver a lev
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whenever its effects on the
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scenario techniques to</str
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Operational risk just ratings infor
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Call for Advice No. 11 Solvency cap
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Costs and Benefits 11.6 It should b
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• Qualitative requirements for <s
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11.19 Risk management criteria set
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individual undertaking is exposed a
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• sensitivity analyses that have
Page 125 and 126:
• visualizations of flows of prod
Page 127 and 128:
Partial models and the</str
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11.58 There should be few descripti
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of the SCR estimat
Page 133 and 134:
equirements to imp
Page 135 and 136:
Call for Advice No. 12 Reinsurance
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Reflection in technical provisions
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• provide an estimate of an under
Page 141 and 142:
particular reinsurer(s)’ aggregat
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they auto<
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einsurer to <stron
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should be a reduction in risk regar
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Call for Advice No. 13 Quantitative
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• the process of
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• handling questions from insuran
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member countries and in the
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components of the
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Background 14.1 Current insurance D
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14.12 In order to
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groups in its answer to</st
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affected; • Impose restrictions o
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14.43 Regarding the</strong
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off all contracts; • to</
Page 171 and 172:
Call for Advice No. 15 Solvency con
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Minimum capital requirement (MCR) D
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adjusted SCR. From a purely technic
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to be implemented.
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capital
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absolute floor (expressed in euros
Page 183 and 184:
Bolkestein agreed to</stron
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16.14 Generally speaking, complianc
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appoint an additional person <stron
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16.28 It should also be noted that
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Time of application 16.41 The asses
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of the individual
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Background 17.1 This document aims
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Review Panel would be a permanent g
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• the developmen
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asis for considering improvements <
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(I) Regulatory arb
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(II) Capital requirements at group
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into a SCR at grou
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18.31 Additionally, it must be deci
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Capital requirements 18.39 The Fram
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(III) Supervisory Review Process of
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18.60 In view of the</stron
Page 217 and 218:
new structure would need to
Page 219 and 220:
future Framework Directive. CEIOPS
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18.94 Model validation in t
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the assumptions us
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Annexes Annex A (Call for Advice No
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pursuing a strategy which t
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Specific principles for non-life in
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Conformity, suitability and suffici
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• existence of significant insuff
Page 235 and 236:
A.64 In the tests
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the rules on <stro
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TVaR1-α for Tail Value-at-risk. In
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Degree of personalisation B.24 Tran
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B.34 There are two approaches <stro
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Segmentation B.44 In general terms,
Page 247 and 248:
technical technical technical techn
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B.61 The second alternative was cho
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Dutch supervisory authority for <st
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Market risk Equity risk this altern
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B.95 In a scenario-based approach,
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B.106 As an alternative one could t
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where: KTSA = the
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Results from the a
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Solvency ratio prior to</st
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Number of instances Risk group Deta
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Conclusion In general, the<
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where: TP gross = technical provisi
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premium risk, the
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“While proportional reinsurance t
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contribute with any additional info
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E.29 Another way <
Page 279:
programmes on the
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