Solvency II

Solvency II is a significant effort to update European insurance regulation. In banking terms, it could be described as the equivalent of going from Basel I to Basel III, skipping Basel II. One of the features of Solvency II is a holistic approach to risk and capital management which, manifests itself in the many relations – implicit or explicit – between the components of Solvency II and in the interest of supervisors. Given the technical nature of insurance, people often undertake specialised roles, e.g. valuations. This course will provide a full overview of Solvency II so that delegates can understand how the various requirements of Solvency II fit together. Attend this intensive and practical 3–day training course and learn: The context and overview of Solvency II and its’ development How Solvency II is structured, its guiding principles and objectives How the various components of Solvency II relate to each other What Solvency II means for European and Global insurers The next steps for Solvency II Who should attend? This course has been specifically designed for the benefit of: Risk managers Financial Reporting specialists Compliance officers Public policy specialists Supervisors and regulators Investment analysts Asset managers and traders System developers Institutional investors Actuaries Accountants Lawyers The course assumes a general familiarity with insurance and its prudential regulation. Methodology The training consists of classroom-based teaching. Solvency II contains quantitative requirements will be covered in terms of the underlying principles and intentions. The course will provide structured opportunities for delegates to discuss in an open environment their views on the key features of Solvency II.
The programme runs from 9.00 to 5.00 daily. Day 1 Introduction Timetable, introductions, expectations Overview of insurance and risk Balance sheet risks Solvency I regime and emergence of local regimes Evidence of financial difficulties Key principles underpinning Solvency II: - Focus on assets and liabilities - Market consistent valuation and risk sensitive - Consistency with management approaches – internal models and diversification benefits - Risk management and disclosures - Early regulatory intervention Overview of Solvency II Overview of 3 Pillar structure Overview of Solvency II balance sheet and quantitative requirements Discussion activity Are the Solvency II principles appropriate for a regulatory framework? Delivering Solvency II Understand the stakeholder map and their roles Different types of legislative material Directive (Level 1), implementing rules (Level 2) and guidance (Level 3) Role of QIS Timelines for implementation Capital instruments / own funds Overview of requirements for instruments to quality as Equity (Tier 1) and debt (Tier 2 and 3) Transitionals for existing capital instruments Solvency tests Understand the difference between requirements to cover SCR and MCR and the quality of the assets available to cover them Regulatory powers Approvals (senior management, appropriatness of SF, internal models, contingent capital, parameter specific SF) Supervision (SRP, capital add-ons, crisis - additional recovery time, outsourcing) Enforcement (breaches of SCR, MCR and technical provisions) Auditors Qualitative requirements and Pillar 2 Board and senior management responsibilities Overview of control functions (Compliance, Risk, Audit and Actuarial) and their roles ORSA - purpose Outsourcing Investment rules - prudent person principle Discussion activity Risk management in insurance, another Potemkin Village? Day 2 Quantitative requirements (pillar 1) – valuations Overview of components of market consistent balance sheet Valuation of assets and liabilities Best-estimate of liabilities Discount rate (swaps, extrapolation, liquidity) Treatment of long-term guarantees Risk margin - purpose and approach Qualitative requirements – data and validation Quantitative requirements (Pillar 1) - SCR Structure - hierarchy of risks Formulae vs scenarios Overview of risks covered Linear diversification Own parameters Discussion activity Putting it all together - capital impacts Quantitative requirements (Pillar 1) - MCR Role: "last line of defence" Overview of formula - limited risk recognition Boundaries to MCR - reference to the SCR Day 3 Internal model approval Requirements for model approval (e.g. use test, model validation, stat quality standard, calibration) Model validation Model change Approval process Discussion activity Internal model and L'Oreal - is it worth it? Disclosures (Pillar 3) Public and regulatory disclosures Quantitative Qualitative Timeliness Discussion activity Which disclosures would be more effective? Groups Group Supervision Quantitative requirements for groups Qualitative requirements for groups Disclosures Model approval Options for groups supervision Colleges Implementation and open issues EIOPA implementation guidelines Omnibus 2 Course summary and close