Solvency and Actuarial Issues Solvency and Actuarial Issues Subcommittee Information SessionSubcommittee Information Session

6 March 2009Rob Curtis - Chair, Solvency & Actuarial Issues Subcommittee

IAIS Triannual Meetings, March 2009

Recent developments in the Solvency and Actuarial Issues Subcommittee 26 March 2009

Presentation OverviewPresentation Overview

• International Solvency Requirements within the IAIS Framework for Supervision

• Recently adopted standards and guidance– Structure of regulatory capital requirements– Use of internal models for regulatory capital purposes– Enterprise risk management for capital adequacy and solvency

purposes

• Current work in progress– Structure of capital resources for solvency purposes– Valuation of assets and liabilities for solvency purposes– Investments

• Future work– Extension of solo level standards and guidance to groups– Opt-in for Internationally Active Insurance Groups (IAIGs)– Review of the Insurance Core Principles (ICPs)

Recent developments in the Solvency and Actuarial Issues Subcommittee 36 March 2009

Solvency requirements are integral in the Solvency requirements are integral in the Framework for insurance supervisionFramework for insurance supervision

Preconditions

Regulatory requirements

Supervisory assessment

LEVEL 1

LEVEL 2

LEVEL 3 Supervisory assessment and intervention

Basic conditions for the effective functioning of

the insurance supervisory authority

the insurance sector and insurance supervision

Financial Governance Market conduct

Common Solvency Structure and Standards

Framework for Insurance Supervision

Recent developments in the Solvency and Actuarial Issues Subcommittee 46 March 2009

Standard setting activities aim at global Standard setting activities aim at global convergence of supervisory practicesconvergence of supervisory practices

Standards

Insurance Core Principles

Guidance papers Issues papers

Supervisory papers Supporting papers

Recent developments in the Solvency and Actuarial Issues Subcommittee 56 March 2009

ISRs: a comprehensive and cohesive set of ISRs: a comprehensive and cohesive set of solvency assessment documentationsolvency assessment documentation

International Solvency Requirements (ISRs)

ISR 1

Capital requirements

(adopted)

ISR 2

Capital resources

ISR 3

Valuation of assets

& liabilities

ISR 4

Investments

ISR 5

Enterprise risk

management (adopted)

ISR 6

Internal models

(adopted)

STAN

DA

RD

S

ISR 1

Capital requirements

(adopted)

ISR 2

Capital resources

ISR 3

Valuation of assets

& liabilities

ISR 4

Investments

ISR 5

Enterprise risk

management (adopted)

ISR 6

Internal models

(adopted)

GU

IDA

NC

E PA

PER

Recent developments in the Solvency and Actuarial Issues Subcommittee 66 March 2009

Draft standard and guidance on capital Draft standard and guidance on capital resources for solvency purposesresources for solvency purposes

• Due for adoption in October 2009.• Papers will cover the following concepts:

– Capital resources should exceed capital requirements

– Consistent with total balance sheet approach– Having regard to quality of capital resources– Regime should establish criteria of assessing

suitability of capital resources

Recent developments in the Solvency and Actuarial Issues Subcommittee 76 March 2009

Draft standard and guidance on valuation of Draft standard and guidance on valuation of assets and liabilities for solvency purposesassets and liabilities for solvency purposes

• Joint working group between Solvency & Actuarial Issues Subcommittee and Insurance Contracts Subcommittee developing draft paper.

• Work will take into account developments in the IASB Phase II Insurance Contracts project.

• The established views of the IAIS are articulated in a positions paper - Market consistent valuation

• Draft expected in October 2010.

Recent developments in the Solvency and Actuarial Issues Subcommittee 86 March 2009

Draft standard and guidance on investmentsDraft standard and guidance on investments

• Review of current standard on ALM and guidance on investment risk management.

• Paper will cover the following concepts:– Regulatory investment requirements should be

established which ensure sufficiency, liquidity and security of an insurer’s investment portfolio as a whole

– Approaches from ‘prudent person’ principles to quantitative limits.

– Governance of investments including ALM based on economic value

• Due for adoption in October 2010.

Recent developments in the Solvency and Actuarial Issues Subcommittee 96 March 2009

Issues paper on groupIssues paper on group--wide solvency wide solvency assessment and supervisionassessment and supervision

• Paper does not take any position but aims at considering issues and challenges in establishing a group-wide solvency assessment framework.

• The paper describes:– How solo supervision needs to be enhanced to consider

group effects– Possible approaches to group-wide supervision and

solvency assessment– Challenges and potential ways to address them

• Paper adopted by Technical Committee at the March 2009 triannual meetings – basis for future work.

Recent developments in the Solvency and Actuarial Issues Subcommittee 106 March 2009

Further WorkFurther Work

• Extend the solo level ISRs to groups• Review of the Insurance Core Principles

(ICPs)• Opt-in for Internationally Active Insurance

Groups– common international capital and solvency

standards– task-force to address this new focus for IAIS

Recent developments in the Solvency and Actuarial Issues Subcommittee 116 March 2009

Proposed ICP restructure under the Proposed ICP restructure under the ISRsISRs

International Solvency Requirements (ISRs)

ISR 1

Capital require-ments

ISR 2

Capital resources

ISR 3

Valuation of assets

& liabilities

ISR 4

Asset-liability &

investment mgmt

ISR 5

Enterprise risk mgmt

ISR 6

Internal models

STAN

DA

RD

SG

UID

AN

CE

PAPER

ISR 7

Supervisory review

ISR 8

Regulatory reporting

and disclosure

ISR 1

Capital require-ments

ISR 2

Capital resources

ISR 3

Valuation of assets

& liabilities

ISR 4

Asset-liability &

investment mgmt

ISR 5

Enterprise risk mgmt

ISR 6

Internal models

ISR 7

Supervisory review

ISR 8

Regulatory reporting

and disclosure

ICP

Valuation

ICP

Capital

ICP

Investments and risk management

ICPs

Note: Subject to Technical Committee endorsement of the 2009-2010 Roadmap

Recent developments in the Solvency and Actuarial Issues Subcommittee 126 March 2009

Sequenced development of Sequenced development of ISRsISRs

Oct 09

1. Standard and guidance on capital resources for solvency purposes

Standard and guidance on

• Valuation of assets and liabilities, incl technical provisions for solvency purposes

• Supervisory review and reporting

• Capital requirements and resources for groups

• ERM for groups

• use of internal models for groups

Oct 10June 10

1. (Revised) Standard and guidance on investments/ ALM for solvency purposes

Note: Subject to Technical Committee endorsement of the 2009-2010 Roadmap

Recent developments in the Solvency and Actuarial Issues Subcommittee 136 March 2009

Thank you for your attention. Any questions/ comments?

Rob Curtis – Chair, Solvency & Actuarial Issues Subcommittee

Note : The adopted standards and guidance papers can be accessed at www.iaisweb.org