challenges of solvency ii2 24 february 2011 secondfloor 3 solvency ii timelines high-level timetable...
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Challenges of Solvency II
Martin Knook CEO, SecondFloor
23rd February 2011
Confidential
SecondFloor 224 February 2011
SecondFloor
• Founded in 2005 – offices the Netherlands, Germany, and France (opening office in UK before summer)
• Experts in Solvency II governance and control in financial risk management
• International Banking and Finance Award winner – for a solution which meets Solvency II requirements
• IISolve and eFrame are the latest solutions in our portfolio of powerful business tools
Admin Re®
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Solvency II Timelines
High-Level Timetable Solvency II Source: FSA: DP08_04 The Path to Solvency II
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Challenges of Solvency II
• The insurance industry is facing different challenges which can be categorised as:
• Organisational – legal and product complications to be implemented
• Centralised and formalised quantitative/qualitative models
• Data management needs to be in place
• A robust business process is required to manage controls across all risk types, calculations, and reporting
• Implementation of function specific solutions
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State of Play
“More than 40% of insurers are still only in the preparatory stages or have yet to launch their Solvency II projects”
Source:
PWC, 2010
73% of insurers have indicated that their data management is not compliant with future regulatory requirements
Source:
Deloitte, 2010
“[...] insurers suffer from a highly complex IT landscape, which makes it difficult to establish the accurate, traceable and auditable risk management framework as requested by the regulators.”
Source: Gartner, 2010
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QIS5 Input Data - Standard Formula
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Data Schedule – Case Study
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Implementation Approach
End-to-End Interaction
Auditor Risk Actuarial LeadershipBusiness Units
Data Warehouse
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Solvency II – Workflow Quick Reference
Pillar 1 Pillar 2 Pillar 3
1.4.5.2 Design of the BSCR Art.104(1)(a)(b)(c)(d)(e), Art.104(2),
Art.104(3), Art.104(4), Art.104(5),
Art.104(6), Art.104(7), Ax.4 (1)
2.2.1 Governance System
Requirements
Art.41(1) 3.1.1 Obligation to provide
information
Art.35 (1) (a)
Art.35 (1) (b)
1.4.5.3 Calculation of the BSCR
non-life
Art.105(1),
Art.105(2)(a)(b), Ax.4 (2)
2.2.2 Policy: Availability,
Approval, Changes & Evaluation
Art.41(3) 3.1.2 Information elements and
principles
Art.35 (3)(a)(b)(c)
Art.35 (4)(a)(b)(c)
1.4.6.4 Policy to change Internal
Models
Art.115 2.2.3 Measures regarding
Continuity and Regularity
Art.41(4) 3.1.3 Appropriate setup of the
information
Art.35 (5)
1.4.6.7 Use Test of the Internal
Model
Art.120,
Art.120 (a)(b)
2.3.1 RM System and
Requirements
Art.44(1) 3.1.4 Providing information
ORSA
Art.45 (5)
Art.45 (6)
1.4.6.8 Statistical Quality
Standards
Art.121(1), Art.121(2), Art.121(3),
Art.121(4), Art.121(5), Art.121(6),
Art.121(7), Art.121(8) Art.121(9)
2.3.4 Risk-Management Function
and Additional Tasks
Art.44(4),Art.44(5),
Art.44(5)(a),(b),(c),(d)
Art.44(5)(e)
3.3.1 Mandatory publication
SFCR
Art.53 (1) (a), (b)
Art.53 (2)
1.4.6.10 Profit and Loss
Attribution
Art.123 2.3.5 Own Risk and Solvency
Assessment (ORSA)
Art.45(1)(a)(b)(c),
Art.45(3), Art.45(5)
Art.45(7)
3.3.2 Contents of the SFCR Art.51(1)(a),(b),(c),
(d),(e),Art.51(2),Art.53
(3),Art.304 (1)
1.4.6.11 Validation Standards Art.124 2.3.6 Solvency Needs – Process
within the RM System
Art.45(2), Art.45(1)(a) 3.3.4 Updates and additions
SFCR
Art. 54 (1)
Art. 54 (2)
1.4.6.12 Documentation
standards for the Internal Model
Art.125 2.4.1 Effective Internal Control
System
Art.46(1) 3.3.5 Important development
MCR and SFCR
Art. 54 (1) (a)
1.5.2 Principles of the MCR
Calculation
Art. 129(1),(a)(b)(c)
Art.129(1)(d)(i)(ii)(iii)(iv), Ax.1(A)
2.8.3 Separation Management of
Life and Non-life Insurance
Activities
Art.74(1)
Art.74(5)
3.3.6 Important development
SCR and SFCR
Art. 54 (1) (b)
1.5.3 Calculation of MCR Art. 129(2), Art. 129(3), Art.129 (4) 2.8.4 Separate Management and
the MCR and SCR
Art.74(2)(b),Art.74(3)(a)(b),Art.74
(4), Art.74(7) Art.73(2)(a)(b),
Art.73(5)(f)
1.6.1 Investments –'prudent
person’ principle
Art.132 (1)
Art.132 (2)
2.8.5 Separate Management and
Accounting
Art.74(6)
1.7.2 Non-compliance with SCR Art.138(1), Art.138(2) Art.138 (3)
1.7.3 Extension of the Period of
Non-compliance with SCR
Art.138 (3)
Art.138 (4)
1.7.4 Non-compliance with MCR Art.139(1),Art.139(2), Art.139 (3),
Art.131
1.7.5 Withdrawal of Authorisation Art.144(1)(a)(b)(c),Art.131
“Workflow” in Solvency II
High-Level Processes
16% 14% 41%
Legal Objects
57% 44% 67%
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Current practise of most insurers
DATA
DATA
DATA
We need storage!
We need to publish, where
is your sign off?
We need modelling!
We need data!
We need approval!
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Case Study – Sign-off
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Case Study – Sign-off
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Spreadsheets Workflow Engine
Standard
Formula Solution
Managed spreadsheets
WorkflowData management
Analyses
Data connectors
Additional input for solo and group level
Input linked to hierarchy node
Access management
Process control
Review input data
Review calculations
Notification
Approve final report
Sign-off and approval
Environment
Reporting Event
Consolidated reporting
What if analyses
Internal model compatibility
Version control
Change control
Access control
Solo models
Group models
Input templates
Including auditor’s
Report
QIS5 – Annex D – CP58
Preconfig package
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Reporting Workflow Engine
Auditable
Internal model
reporting
Functionalities
WorkflowData management
Integration
Review input data
Review calculations
Notification
Approve final report
User Portal
AuditorActuary Business units
Risk Board
Modelling
Actuarial models
Proxy models
Simulation
MCEV/EC/SCR
Aggregation
Connector
Reporting
Report design
Report engine
Connector
Connector
Data warehouse
Asset and Liability data
Risk data
Market data
Manual data
Connector
Connector
Connector
Other dataConnector
Environments
Entity structure
Reporting excersize
Correlations
Tax ruling
Authorisations
Archiving
Environments
Entity Structure
Reporting Exercise
Correlations
Tax Ruling
Authorisations
Archiving
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© Copyright 2011. SecondFloor. All Rights Reserved.
SecondFloor BV
Beech Avenue 180
1119 PS Schiphol-Rijk
The Netherlands
www.secondfloor.nl
Contact
Martin Knook
CEO SecondFloor
Mobile: +31 6 5475 6938
Interested in discussing your Solvency II challenges?