rbc - scor campus

Download RBC - Scor Campus

Post on 15-Apr-2017

239 views

Category:

Documents

3 download

Embed Size (px)

TRANSCRIPT

Introducing risk based supervision in e.a.

Reviewing risk based supervision in e.a.Ezekiel MachariaActuarial society of kenya Risk based supervision working party23rd September 2015

Scor campusNairobi, kenya1

1

COMPLIANCE based supervision

The good old days? For whom?2

2

AGENDAReview of the East African MarketRisk Based Supervision Framework for KenyaRisk Based Capital CalculationConclusion

3

REVIEW OF THE EAST AFRICAN MARKET4

GDP Growth (2014): 6.3%% of population below 14yrs: 44.44% Insurance Penetration (2013): 0.6% Key Characteristics of East African MarketGrowing economyYoung PopulationLow Insurance PenetrationGDP Growth (2014): 1.5%% of population below 14yrs: 29.4% Insurance Penetration (2013): 15.4% Source: World Bank, Country Insurance RegulatorGDP Growth (2014): 7.0%% of population below 14yrs: 44.79% Insurance Penetration (2013): 0.9% GDP Growth (2014): 5.3%% of population below 14yrs: 42.04% Insurance Penetration (2013): 3.4% GDP Growth (2014): 4.5%% of population below 14yrs: 48.18% Insurance Penetration (2013): 0.85% GDP Growth (2014): 4.7%% of population below 14yrs: 44.75%Insurance Penetration (2013): GDP Growth (2014): 7.0%% of population below 14yrs: 42.07% Insurance Penetration (2013): 1.6% Population (2013)

PRE-EMPTING CHANGE IN REGULATION?

Change to RBS is expected to spur M&A. This is already happening and we expect a higher level of consolidation

5

AGENDAReview of the East African MarketRisk Based Supervision Framework for KenyaRisk Based Capital CalculationConclusion

6

KENYA moving to risk based supervision by 20187

Kenya: Risk Based Supervision Timetable*New Insurers: RBC in 1 Oct 2015 Existing Insurers: RBC in 30 Jun 2018

*Changes contained in Finance Bill 2015

KEY COMPONENTS OF RISK BASED SUPERVISION

8

Changes in Kenya are inline with International Association of Insurance Supervisors (IAIS) - Insurance Core Principles (ICP). All East African (Kenya, Uganda, Tanzania, Burundi & Rwanda) countries are members of IAIS.Onsite inspections and increased level of reporting requirements through electronic regulatory submissions.

Focus on kenya: Key Changes to mcr

9

Onsite inspections and increased level of reporting (electronic regulatory submissions), disclosure and market discipline. Introduction of an annual Financial Condition Report.

KENYA: REGULATORY BALANCE SHEET10

In compliance/rules based regime, the minimum capital requirement (MCR) was the solvency capital requirement (SCR). Introduction of risk based capital increases the possible solvency requirement.Special asset classes for minimum capital. This means that Own Funds assets will be divided into Tiers with MCR backing being most restrictiveTechnical provisions to be based on best estimate + risk margin

KENYA: capital adequacy ratio11

The required Capital Adequacy Ratios will depend on the size of insurer (CAR) - initial proposals show an acceptable CAR of 130% Management of Insurers will recommend a higher CAR, say 200%.Assets will be valued based on fair value approach, i.e. (i) readily available price (listed securities) or (ii) price determined from an arms-length transaction between willing parties.

AGENDAReview of the East African MarketRisk Based Supervision Framework for KenyaRisk Based Capital CalculationConclusion

12

KENYA: risk based capital STANDARD MODEL13

Maximum of RBC & MCR

VaR measure of basic Own Funds with a 95% confidence interval over a one year time horizon

KENYA: risk based capital INSURANCE RISK CAPITAL14Insurance Risk Capital charge covers the variation of the actual experience from that assumed in the pricing basis

Capital requirement is based on change in Net Asset Value ( NAV) following a permanent increase/decrease of x% in the parameter value

SLT:Critical illness, Income Protection, Long-term care Insurance

Non-SLTPrivate Medical Insurance(PMI)

KENYA: risk based capital INSURANCE RISK CAPITAL15

Initial charges based on regulators internal QIS 1New charges under consideration

KENYA: risk based capital MARKET RISK CAPITAL16Market Risk Capital charge covers the volatility in the asset prices.

Equity, Property & Currency Risk Capital charges are pre-determined

Interest Risk Capital based on change in surplus due to change in interest rate

KENYA: risk based capital CREDIT RISK CAPITAL17Credit/Counterparty risk capital charge covers the likely loss resulting from changes in the value of assets and liabilities as a result of unexpected default or retrogression in the credit rating of independent counterpartiesKey counterparty for insurers Reinsurance and capital is required for Reinsurance share of claim provisions

AGENDAReview of the East African MarketRisk Based Supervision Framework for KenyaRisk Based Capital CalculationConclusion

18

CONCLUSION

19

East Africa is moving towards Risk Bases supervision frameworkKenya has taken the lead and will implement RBS in 2015 for new insurers and by 2018 for existing insurersDisclosure requirements and internal supervision requirements already in place in Kenya with quantitative requirements to be introduced in Q4 2015.Risk based model under review by Working Party of The Actuarial Society of KenyaPreliminary Risk Based Capital Requirement shows that Kenyan Insurers may need to inject capital

?QUESTIONSEzekiel Macharia, Actuarial Society of Kenyaezekiel.Macharia@gmail.com

20