Solvency II Consulting Knowledge Series

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Knowledge Series Solvency II

The Knowledge Series provides up-to-the-minute information on the status of the Solvency II discussion. It offers insights into consulting services and reflects on the work of the committees, tasks forces and authorities involved at European level.

Publications

Date Title Download PDF
08/2014 Economic projection and implications for management decisions

This paper discusses the concepts of multi-year projections of a company´s balance sheet and risk model and discusses how that information can be used for managing a company. That concept is also illustrated in a case study.
English (PDF, 369 KB)
06/2014 Omnibus II brings more clarity: Transitional measures for own funds

This paper describes quantitative limits for eligible capital within Solvency II, explains the current status of transitional rules and discusses open questions.
English (PDF, 460 KB)
3/2014 RISA+
A standard model for non-life insurers

This tool and product can depict the main items in the Solvency II balance sheet, and the analyses forecast the effect of Non-life reinsurance in a multi-year view.
English (PDF, 346 KB)
01/2014 Reinsurance in the economic balance sheet

This paper discusses the impact of reinsurance on an economic balance sheet. We clearly show that the financial strength of reinsurers is not only taken into account within the risk model, but also for accounting purposes.
English (PDF, 940 KB)
German (PDF, 737 KB)
01/2014 Reinsurance in capital management
Effect of reinsurance and tiering of own funds at insurers with little surplus capital

With the introduction of Solvency II, capital management becomes crucial to secure a company’s solvency situation. In that context, reinsurance serves as a capital tool – being very competitive against the issuance of new capital.
English (PDF, 681 KB)
12/2013 “EIOPA’s view on the system of governance”

Recently, EIOPA published its reports on the guidelines on preparing for Solvency II. In this paper, we refer to selected aspects of the governance system. The new guidelines contain some improvements that will affect actual procedures, such as the role of risk management in senior-management decision-making.
English (PDF, 557 KB)
12/2013 Introduction of a new risk-based capital framework in Singapore – Convergence or divergence in relation to Solvency II?

The risk based capital framework (RBC) for insurers in Singapore was introduced by the Monetary Authority of Singapore in 2004. This paper introduces the proposals suggested as well as the reactions from the industry and the Singapore Actuarial Society. Further, we will compare the proposals with the current status of Solvency II.
English (PDF, 642 KB)
10/2013 Experience report: Four years working with PODRA

As the importance of Enterprise Risk Management grows, the modelling of underwriting risks is becoming crucial for non-life insurers. Quantification of all relevant risk drivers and depiction of risk transfer instruments such as reinsurance play a major role. Learn more about a holistic analytical view of risk at non-life insurers.
English (PDF, 857 KB)
German (PDF, 719 KB)
10/2013 EIOPA’s view on forward-looking assessment of own risks (FLAOR)

The “Forward Looking Assessment of Own Risks” is a new element of the final reports on the Guidelines on preparing for Solvency II published in September 2013. Our article gives a brief introduction to the concept and the background of FLAOR. Additionally, we look at the potential impact of current developments on risk management.
English (PDF, 865 KB)
08/2013 EIOPA publishes the findings of the quantitative impact study on long-term guarantees

Our paper looks at the methodologies tested and the findings, and presents the resultant proposal from EIOPA. It also summarises reactions from the industry and associations and considers the next steps on the road to Solvency II's introduction.
English (PDF, 868 KB)
German (PDF, 668 KB)
03/2013 From strategic risk to risk strategy. Insurance scenarios for risk identification and business model innovation

How is risk strategy defined? What strategic scenarios are relevant? We show you how to broaden your risk culture.
English (PDF, 231 KB)
German (PDF, 183 KB)
02/2013 Key functions in the system of governance Responsibilities, interfaces and outsourcing under Solvency II

This article shows the range of requirements for the so called “key functions”: Risk management, compliance, internal audit and actuarial function.
English (PDF, 261 KB)
German (PDF, 465 KB)
12/2012 A partial model for life insurers: BRiSMA – stochastic modelling of biometric risks

The decision to use the standard model or to develop a partial or an internal model depends on many factors. The approach is consequently discussed with the client in the framework of a project and the analysis takes account of many aspects specific to the company.
English (PDF, 629 KB)
German (PDF, 699 KB)
09/2012 Cost of capital under Solvency II. Reinsurance and capital market instruments

This paper compares reinsurance and capital market instruments as ways of increasing a solvency ratio, focusing on a quantitative comparison of the costs of the two alternatives and qualitative aspects.
English (PDF, 319 KB)
08/2012 ORSA – Own Risk and Solvency Assessment
Preparations can start

With the introduction of Solvency II, insurance companies must perform their own risk and solvency assessment (ORSA), which will become a significant component of their risk management system. EIOPA published 21 guidelines that companies can use as a basis for their preparations.
English (PDF, 574 KB)
German (PDF, 578 KB)
06/2012 Calculation of risk capital using “undertaking-specific parameters” under Solvency II
Are there alternatives to an internal model?

According to the current state of the debate on the implementing measures, for many lines of businesses it will only be possible to take account of non-proportional reinsurance treaties by using correction factors in the calculation of USPs. Companies should therefore consider the use of USPs.
English (PDF, 218 KB)
German (PDF, 591 KB)
02/2012 Solvency II: Where will the long road to the standard formula lead us?
The insurance industry awaits the European Commission’s implementing measures

The standard formula has changed considerably since 2006. It reflects the risk more closely, but has become more complex. To be prepared for the introduction of Solvency II, it is important to be aware of the implementing measures in good time.
English (PDF, 1.1 MB)
German (PDF, 1.2 MB)
09/2011 Will Solvency II give full recognition to third-country supervisory systems?

The ability to set up branches and freedom of services are important principles for the European single market. Recognition makes it clear how insurance contracts with insurance companies from third countries are to be treated.
Englisch (PDF, 867 KB)
German (PDF, 866 KB)
08/2011 Process risks for life insurers under Solvency II

In the context of Solvency II implementation, the regulatory requirements are focusing on the main processes, one of which is the underwriting process, a core component of new business in life.
English (PDF, 950 KB)
German (PDF, 936 KB)
08/2011 Treatment of technical provisions under Solvency II. Quantitative methods, qualitative requirements and disclosure obligations

Experience gained in QIS5 has demonstrated that the calculation of technical provisions is still causing problems for the insurance industry.
English (PDF, 843 KB)
German (PDF, 849 KB)
07/2011 Positions of European insurers on Solvency II

Discussions on the form the implementing measures should take are in full swing. The European Commission asked various interest groups about the expected impact of these measures. You can learn about the key findings here.
English (PDF, 330 KB)
German (PDF, 333 KB)
05/2011 Solvency II and catastrophe risks: Measurement approaches for property casualty Insurers – country-specific requirements or standard formula?

The QIS5 results indicate that European non-life insurers need to allocate around a quarter of their entire risk capital to catastrophe risks. The standard formula offers two different methodologies for calculation of risk capital needs.
English (PDF, 382 KB)
German (PDF, 385 KB)
04/2011 EIOPA publishes the results of the fifth quantitative impact study (QIS5). More adjustments to standard formula needed

QIS5 was probably the insurance industry’s last opportunity to test the total balance sheet approach and its implications, though it is likely that there will be further tests for individual valuation modules.
English (PDF, 550 KB)
German (PDF, 558 KB)
03/2011 Will omnibus II give insurers more room for manoeuvre?

The European Commission has provided for transition periods to be laid down, their purpose being to avoid market turbulence and ensure a smooth transition from Solvency I to Solvency II.
English (PDF, 271 KB)
German (PDF, 276 KB)
02/2011 Impact of reinsurance on risk capital
A practical example based on QIS5

Solvency II obliges companies to take a risk-based view of their operations as a whole. Sample calculations for a specimen company show that reinsurance remains the simplest and most flexible way for an insurer to manage its business on an economic basis.
English (PDF, 1.1 MB)
German (PDF, 761 KB)
11/2010 Solvency II and reinsurer ratings

The fifth quantitative impact study (QIS5) is likely to be the last official test of the current design and calibration of the standard formula across the whole of Europe. From an insurer’s perspective Solvency II may not lose sight of the real objective.
English (PDF, 483 KB)
German (PDF, 480 KB)
08/2010 Health Catastrophe Scenarios under Solvency II. A new and important risk is appearing in QIS 5

This paper provides a description of the methodology employed in the health module and sheds light on the inherent structure of catastrophe scenarios from an actuarial perspective.
English (PDF, 500 KB)
German (PDF, 496 KB)
08/2010 QIS5: European Commission publishes final technical specifications

QIS5 is expected to be the last study officially carried out by the Commission with the support of CEIOPS that insurers can use to determine their future solvency requirements on a test basis before the new supervisory system finally comes into effect. Insurers should expect higher capital requirements than under QIS4.
English (PDF, 607 KB)
German (PDF, 612 KB)
08/2010 Will Solvency II give full recognition to non-EU supervision systems?

The European Commission expects CEIOPS to submit its first proposed implementing measures by the end of August 2010.
English (PDF, 201 KB)
German (PDF, 203 KB)
07/2010 From business strategy to limit system (part 2)
A case study of a property-casualty insurer

Following on from Part 1 of “From business strategy to limit system”, Part 2 uses a case study of an average European property/casualty insurer, LIMIT, to provide an illustration of the theory.
English (PDF, 477 KB)
German (PDF, 481 KB)
06/2010 From business strategy to limit system (part 1)
Introduction to the theory

Limit systems will play an important role under Solvency II. Therefore we introduce the following paper: Part 1 covers the generally abstract terminology and explains clearly how risk strategy, risk tolerance and limit system interact. Part 2, which will be released shortly, illustrates this interaction using a fictitious property insurer as an example.
English (PDF, 384 KB)
German (PDF, 414 KB)
04/2010 Internal Models: European supervisors working on the approval process

Under Solvency II, insurers will be able to capture their portfolios more precisely using their own measurement tools and models, and this will generally lead to lower capital requirements. However, the hurdles to be cleared by an internal model to obtain approval are high.
English (PDF, 451 KB)
German (PDF, 459 KB)
04/2010 State Covers under Solvency II

Even if insurance solutions involving state covers (pool arrangements) restrict competition in the insurance market, an insurance market without such covers has now become inconceivable. The future supervisory regulations are therefore intended to ensure that all market solutions in the EU satisfy the basic principles of risk management.
English (PDF, 320 KB)
German (PDF, 323 KB)
10/2009 Reinsurance's qualitative contribution to value added within the framework of Pillar 2 of Solvency II

This paper discusses qualitative aspects of reinsurance in the context of Solvency II’s Pillar 2 regime.
English (PDF, 473 KB)
07/2009 Standard formula or (partial) internal model? Analysis based on the results of the CRO Forum QIS4 benchmark study

Standard formula or own model? Companies should not just wait to receive guidelines.
English (PDF, 458 KB)
German (PDF, 461 KB)
06/2009 Full speed ahead for Solvency II

Now that the Directive has been adopted, CEIOPS can at last concentrate on the implementing measures. CEIOPS in fact published several consultation papers in March of this year.
English (PDF, 58 KB)
German (PDF, 60 KB)
02/2009 Reinsurance in the era of Solvency II

The timeframe for implementation of Solvency II is still the subject of lively political discussion. But there will be a profound shift in the way insurers evaluate and handle their entire range of risks.
English (PDF, 310 KB)
01/2009 CEIOPS plans first implementing measures for Solvency II

The adoption of the Framework Directive at EU level is awaited with anticipation, as the most important principles will be laid down in it. For as soon as it has been adopted, implementing measures will need to be established. CEIOPS is already drafting initial proposals.
English (PDF, 56 KB)
German (PDF, 59 KB)
12/2008 Fourth study of the Solvency II standard approach

CEIOPS carried out the fourth Quantitative Impact Study (QIS4) from April to July this year. The insurance companies were asked to prepare the Solvency II balance sheet at marketvalues and to test future capital requirements using a European standard formula.
English (PDF, 65 KB)
German (PDF, 68 KB)
12/2008 Solvency II for property-casualty insurers (II)

This article presents the fundamental principles of the total balance sheet approach and the implications of Solvency II for a property-casualty insurer.
English (PDF, 65 KB)
German (PDF, 69 KB)
12/2008 Solvency II for property-casualty insurers (I)

This report is a follow-up to our articles on the reducing effect of reinsurance on the solvency capital requirement.
English (PDF, 54 KB)
German (PDF, 57 KB)
09/2008 Impact of reinsurance on risk capital - A practical example

Solvency II obliges companies to take a risk-adequate view of their operations as a whole. Sample calculations for a specimen company using the standard model and a partial model show that reinsurance remains one of the simplest and most fl exible ways for an insurer to manage its balance sheet.
English (PDF, 1.1 MB)
German (PDF, 761 KB)
07/2008 Discussions on the Framework Directive proposal for Solvency II and global developments

The European Council and European Parliament are continuing their discussions on the Framework Directive proposal for the future supervisory system. The co-decision procedure means that both sides have to agree for the proposal to be accepted.
English (PDF, 62 KB)
German (PDF, 64 KB)
06/2008 PillarOne - Risk management tools

The insurance industry is currently operating in a liberal market characterised by pressure on capital and high business volumes. Developments in data analysis and processing have provided us with a better understanding of risk structure and dimension.
English (PDF, 49 KB)
German (PDF, 51 KB)
04/2008 Best estimate for Solvency II

Realistic assumptions and appropriate actuarial techniques are essential for calculations of company-specific best estimates for claims. This paper focuses on how bestestimate technical provisions can be derived for propertycasualty insurance and outlines important factors relevant for deriving best estimate mortality and morbidity rates in life insurance.
English (PDF, 57 KB)
German (PDF, 62 KB)


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