From solvency i to solvency ii, a long journey what are the solvency requirements used for 04 how we were 05 the transition towards the new regulation 06 the new prudential discipline principles the concept of risk 07 the black swan 08 a scale always in balance 09 a building that rests on three pillars 10 the role of supervision changes 11. Solvency ii in areas such as target solvency ratios, the management of capital demands and the application of longterm guarantee measures will affect your reported earnings and funds available for investment and dividend payments. We recommend a more balanced framework between pillar i and iiiii. This is aimed at reducing an insurers risk of insolvency. Pillar 1 covers the capability of an insurer to demonstrate it has adequate financial resources in place to meet all its liabilities and. Pillar 3 reporting requirements of solvency ii highlights. Unlocking pillar iii leading business advisers solvency ii pillar iii reporting requirements with solvency ii finally here, reinsurance entities are now working to meet the pillar iii reporting requirements, with the first submission of day 1 information due on the 20th may 2016. Pdf solvency ii is currently one of the most sophisticated insurance regulatory. Insights into the business internally, pillar 3 information could join with. Solvency ii pillar iii quantitative reporting templates qrts. Pillar i calculation of capital reserves pillar ii management of risks and pillar iii reporting and disclosure ii going live.
Under the solvency ii framework, pillar iii will be the public and private reporting face of the technical provisions and capital requirements required under pillar i and will provide the evidence of the own risk and solvency assessment orsa and the insurers risk governance framework under pillar ii. The solvency ii directive directive 20098ec introduces advanced solvency requirements for insurers based on a holistic risk assessment, and imposes new assessment rules for assets and liabilities, which in future must be assessed at market values. Drawing on our wideranging work with clients and discussions with supervisors and other relevant bodies, the paper looks at how to tackle the key strategic and implementation issues emanating from the solvency ii reporting and disclosure requirements. With abacus insurance, we offer an endtoend standard software solution to support insurance companies and pension funds in meeting their reporting requirements under eiopas solvency ii pillar 3 and iorp ii directives. We conclude that solvency ii satisfies most of these criteria. There are conceptual similarities between ifrs and solvency ii and it will be important to make the most of these synergies when designing and developing models. Pillar 1 sets out quantitative requirements, including the rules to value. Solvency ii4 solvency ii time line on april 22, 2009, the european parliament approved the solvency ii framework directive, due to become effective january 1, 20. Solvency ii and the challenges of pillar iii reporting. Reason for an update solvency ii for general insurance. Many recognize the challenges of data consolidation, data cleansing, calculating accurate results and formatting reports to submit to the regulators. General information key elements of solvency ii are the requirements relating to transparency and reports to be submitted to the supervisory authority as specified in pillar 3.
Nevertheless, over time, solvency ii and the disclosures required by pillar iii. Solvency ii and its 3 pillars in a nutshell solvency ii sii is a european directive for insurers governing capital requirements,creditworthiness and risk management due to be implemented in over 30 countries european economic area eea i. Pillar 3 of solvency ii sets out the requirements applying to public disclosures of information and supervisory reporting, at both solo and group level. Pillar 3 addresses transparency, reporting to supervisory authorities and. Basel iii framework for banking supervision, solvency ii has been organized in three pillars. Esrb response to the eiopa consultation paper on the 2020. In 2014, the basel ii capital requirements will be gradually replaced by the basel iii framework, which will gradually enter into effect. Pillars i, ii and iii the pop is a fundamental component of the solvency ii directive which is deemed to be. This document highlights the key timelines for insurers of the new ifrs 17 standard as well as solvency ii. Solvency ii software eiopa solvency ii directive workiva. Solvency ii introduction to pillar 3 friday 20th may 2016.
Basel iii versus solvency ii malcolm kemp presentation to hungarian actuarial society 89 november 20. The solvency ii directive is imposing huge demands on insurers in terms of the market and regulatory disclosures they need to make. Third, pillar 2 provisions in solvency ii should be enhanced to enable supervisors to require individual insurers with vulnerable. Solvency ii comes at you from many angles, but cch tagetik solvency ii prepackaged solution has the templates, calculations, reports, and dashboards you need to accelerate pillar i, pillar ii, and pillar iii compliance. With solvency ii, the eu commission aims to have a framework applicable to everyone. The new supervisory regime solvency ii came into force in full on 1 january 2016. Solvency ii bermudas regulatory framework tim faries group supervision i. Requirement to disclose information relating to risk and capital levels, designed to help exert. Solvency ii directive articles 36, 45 and 246 delegated acts articles 262 and 306 eiopa guidelines on own risk and solvency assessment domestic actuarial regime and related governance requirements under solvency ii published by the cbi sections 2.
The views expressed in this presentation are those of the presenters and not necessarily of the society of actuaries in ireland disclaimer ursula morrow, senior consultant, pwc rob murphy, consultant, pwc introduction. Pillar i focuses on solvency capital requirements scr, pillar ii centers on governance and supervision, and pillar iii addresses disclosure and supervisory reporting. As insurers receive premiums up front and pay out claims if and when they arise, the. Pillars ii and iii of solvency ii will however present a much greater challenge. Product strategies under solvency ii and ifrs 4 phase ii. Introduction to solvency ii institute and faculty of.
It then highlights possible unintended consequences of basel iii and solvency ii on topics such as cost of capital, funding patterns, interconnectedness and. Framework directive 20098eu, introducing the essential principles of the new regime. In practice it is likely that many of the stress tests are quite manual, whereby. Solvency ii pillar iii in this area it is possible to consult the report on financial solvency and financial condition sfcr relating to cattolica assicurazioni.
Basel iii and solvency ii capital tiering pillar 1 2. The solvency ii regime introduces for the first time a harmonised, sound. Three steps to solvency ii pillar iii reporting moodys. Solvency ii is an advanced supervisory regime and is based on the latest international developments in riskbased supervision, actuarial science and risk management. Pdf a critical analysis of the solvency ii proposals researchgate. Pillar 3 is the disclosure and supervisory reporting regime, under which defined reports to regulators and the public are required to be made. Pillar1 pillar 2 pillar 3 the industrys solvency ii attention has to date largely been on the 3 pillars, with predominantly.
As the new european regulatory framework under solvency ii marches closer, attention is increasingly. Solvency i will be replaced by the fundamentally reformed solvency ii framework, whose official entry into force has now been confirmed as january 2016. Pillar 1 is all about the calculations, models and capital requirements. So you can meet all its qualitative, quantitative and disclosure requirements with ease, our solution reduces risk and puts. In pillar 1 the new solvency system contains two capital. Solvency ii the principle of proportionality and its. The revised pillar 3 disclosures in this documentfocus on regulatory measures defined in pillar 1 of the basel framework, which requires banks to adopt specified approaches for measuring credit, market and operational risks and their associated resulting riskweighted assets rwa and capital. Solvency ii will bring the harmonization of asset and liabilities valuation. The solvency ii regulatory framework has different layers at supranational level. Basel iii versus solvency ii this presentation based on an imf working paper explores similarities and differences between banks and insurers and between basel iii and solvency ii. It suggests key areas for consideration to help companies understand the implications for their organisation.
With so much attention devoted to the pillar 1 capital ev aluation and pillar 2 risk. The first pillar deals with maintenance of regulatory capital calculated for three. Three pillar approach pillar 1 ultimate regulatory action initial intervention free assets mcr c scr a p i t l a riskbased approach to solvency requirements based around a 2level capital requirement scr is at a 1200 var level over a 1year time horizon mcr is intended to be at around the 110 var. The proposed solvency ii framework has three main areas. Joint iaca, iaahs and pbss colloquium in hong kong. Learn how you can improve data governance, transparency and mapping throughout your eiopa solvency ii process. Solvency ii is designed around a 3 pillar structure where an effective pillar iii supervisory reporting and public disclosure regime is considered. Regulation 201535eu the socalled delegated acts a second level measure, containing detailed measures on the new regime, recently amended by eu delegated regulation 2016467. Yet, for many insurers, meeting the reporting requirements has slipped down the agenda as managing the directives capital requirements and risk governance. Directive level 1 implementing measures level 2 implementing technical standards level 2. As the deadline for solvency ii approaches, many insurers are assessing the best approach to delivering the pillar iii reports required by eiopa. As we have seen, pillar i consists of quantitative requirements for risk management, and includes valuation principles for the balance sheet as well as two forms of minimum capital requirement. Comparison of the regulatory approach in insurance and banking. Solving the data challenges of solvency ii moodys analytics.
Any subsequent comment by eiopa could supersede any. They are based on a total of 76 empowerments3 in the solvency ii. As europe is the worlds largest insurance market, with 35% of the global market, nonequivalence with solvency ii would have a dramatic impact on. Primarily this concerns the amount of capital that eu insurance companies must hold to reduce the risk of insolvency following an eu parliament vote on the omnibus ii directive on 11 march 2014, solvency ii came into effect on 1 january 2016. Solvency ii is broader than basel iiiii in that it is a total balance sheet approach. A breakdown of the solvency ii three pilars framework into its constituent components, so as to identify.
Solvency i solvency ii solvency i vs solvency ii timetable starting. European supervisors need only to consider individual entities within their jurisdictions on a standalone basis. Industry thought leaders emea pillar 3 survey 2015 it solutions for sii survey 2014 it data architecture 2014 solvency ii strategy 2015 our experience will reduce the cost and time to compliance. With the workiva platform, numbers and narrative can be reused across reportsincluding orsa, sfcr and rsrproviding confidence in the accuracy throughout the reporting process.