Solvency II

} Date: TBC

Duration: 1 Day

Full Fees: €600

Network Members Fee: €350

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Programme overview

Solvency II is the EU directive which harmonises the regulation of insurance companies in Europe and introduces new capital adequacy rules to cover risk and potential liabilities. The idea behind the new rules is to align capital requirements with actual risk. The rules were originally to be implemented by the end of 2012 but this was extended to 1 January 2016. This course will focus on the practical implementing challenges that insurers are likely to face. In addition, we will examine new accounting rule changes for the insurance sector and the resultant data requirements necessary both to comply with the insurance and accounting regulatory changes.

Learning Outcomes

  • This course will focus on the practical implementing challenges that insurers are likely to face.
  • In addition, we will examine new accounting rule changes for the insurance sector and the resultant data requirements necessary both to comply with the insurance and accounting regulatory changes.

Who should attend

This course is suitable for all staff working in the banking and financial services industry.

Course Content

Solvency Capital Requirement

  • Non-life underwriting risk
  • Special health underwriting risk
  • Market risk
  • Credit/Operational Risk

Purpose of Solvency Requirements

  • Reduce risk of insurer not meeting claims
  • Reduce losses suffered by policy holders
  • Early warning for supervisors
  • Confidence in financial stability of insurance sector

Basel 2 v Solvency 2

  • Pillar 1 Quantitative requirements
  • Pillar 2 Governance and risk management
  • Pillar 3 Disclosure and transparency requirements

Leverage and Gearing

  • Benefits of high gearing
  • Corporate Finance financing guidelines
  • Incentive schemes that encourage high gearing
  • Volatility and capital requirements

Three Pillars of Solvency II

  • Pillar 1 consists of the quantitative requirements (for example, the amount of capital an insurer should hold).
  • Pillar 2 sets out requirements for the governance and risk management of insurers, as well as for the effective supervision of insurers.

Hypothetical Regulatory Basis

  • Liability Measured using Risk Free Rate
  • Liability Measured using Asset Based Rate
  • Embedded Value Approach

New developments in regulation

  • Anticipation of future adverse events
  • Historical data trends
  • Liability risk
  • Market, credit and operational risk

Causes of Failure

  • Poor management,
  • Inappropriate risk decisions
  • Case Study Equitable Life
  • Shortfalls in pricing models

Type of Models

  • Standard Model
  • Internal Foundation
  • Internal Advanced models
  • Supervisory role

Disclosure Requirements

  • Own Risk and Solvency Assessment (ORSA)
  • Solvency and Financial Condition Report (ORSA)
  • Market risk disclosures
  • International Financial Reporting Standards disclosure

Solvency III?

  • Likely changes
  • Structure.
  • Timetable

Trainer Profile