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TRANSCRIPT
22 February 2018
CEE & SEE – Regional Actuarial Insurance Conference 2018
The insurance regulatory landscape– challenges & opportunities
22 February 2018
Contents
2Regional Actuarial Conference
• The CEE insurance market
• The regulatory landscape is changing
• Solvency II – the new insurance standard
Contents
22 February 2018
The CEE insurance marketTotal GWPs
3Regional Actuarial Conference
2,889
1,087
738
329
234
513
206
121
91
110
59
43
35
10
4
1
7
4,582
1,854
834
836
869
553
459
461
313
278
269
165
141
64
52
41
33
- 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
Poland
Czech Republic
Hungary
Slovenia
Romania
Slovakia
Croatia
Bulgaria
Serbia
Lithuania
Latvia
Estonia
Bosnia-Herzegovina
Macedonia
Albania
Kosovo
Montenegro
Life insurance Non-life
Contents
*Source: Xprimm
22 February 2018
The CEE insurance marketAverage wage and GWP per person
4Regional Actuarial Conference
784
873
728
1,151
565
748
833
457 456
674 667
942
441 377
347 374
512
197
280
160
566
55
197 157
80 57
132 164 158
50 36 19 24 64
-
200
400
600
800
1,000
1,200
1,400
Average wage (euro) GWP per person
Contents
*Source: World Bank
22 February 20185
Regional Actuarial Conference
The CEE insurance marketStructure of GWPs
35%
13%
13% 4%
22%
13%
35%
Life Property Other Liability Mandatory auto Motor hull
Contents
22 February 2018
The industry’s regulatory landscape is changing
6Regional Actuarial Conference
Contents
22 February 2018
• The equivalent of Basel II for insurance market
• More focus on capital requirements and alignment with insurance risk
• Is applicable to all insurance areas (life, non-life, reinsurance)
• EU standard, consistent application
Solvency II - key aspects
7Regional Actuarial Conference
Contents
22 February 2018
Solvency II - the 3-pillar framework
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PILLAR II
Governance and risk management
• Management and decision making
• What policies, controls, processes to mitigate risk
• System of governance
• Own risk and solvency assessment (ORSA)
• Supervisory review process
• Supervisory intervention including capital add-on
PILLAR I
Quantitative requirements
• How capital requirements are calculated
• How current assets/ liabilities are measured
• Assets & Liabilities – market consistent valuation
• Solvency Capital Req. (SCR)
• Minimum Capital Req. (MCR)
• Own Funds
PILLAR III
Disclosurenuudsuuiiuiu
• Requirements for reporting and disclosure
• To both the public and to supervisors
• Annual solvency and financial condition report made public
Contents
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Solvency II - a balance sheet approach
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SCR(includes MCR)
Insurance liabilities (“Technical provisions”)
Surplus
Other liabilities
Assets
Assets on balance sheet
Off balance sheet items
Own Funds
Liabilities
Contents
22 February 2018
Solvency II - the risk structure
10Regional Actuarial Conference
BSCR
SCR Non-Life
Equity
Interest rate
Property
Spread
Premium Reserve
Lapse
Market Health health
Expenses
Mortality
Life
SCR
Op
Currency
Default
Revision
Adj.
Concentration
SLT Health
Non SLT Health
CAT
Revision
Lapse
Lapse
Longevity
Disability/
Morbidity
Mortality
Longevity
Disability Morbidity
Lapse
Expenses
Premium Reserve
CAT
Intangible
CAT
Contents
22 February 2018
• Applicable as of 1.01.2016
• Audit of template reports (balance sheet, own funds, SCR, MCR)
• MCR: EUR 3.5m
• The most important report– SFCR
• Biggest challenge: how to define contractual boundaries?
• Life insurance: future premiums
• Non-life: the right to unilaterally terminate the contract
• Assets: market value
• Liabilities: new assumptions
Other aspects: putting data in EIOPA format, huge investments in software programs
Solvency II in practice – the Romanian experience
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Contents
22 February 2018
Applying Solvency II – opportunities
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• Risk management
• Reducing capital at risk
• Better perception of diversification benefits
Better capital allocation
• Risk becomes an explicit price component
• More complete and accurate sets of data
• Reinsurance and hedging
More efficient decisional making process
• Higher barriers to entry
• Consolidation of the market
• A better perception of risk leads to an increased demand of insurance products
Market dynamics
Contents
22 February 2018
Applying Solvency II – Challenges
13Regional Actuarial Conference
• Distributing risk between various parties• Securing MCR / SCR vs. pressure on pricing • Understanding the interconnection of risks
Risk & profit
• Product price strategy • Tighter competition for undiversified insurance companies • Capital arbitrage
Competition
• Product characteristics are changing rapidly • Changing pricing policy • Practical aspects: risk modelling, resources (financial etc.)
Pace of change
• Aligning remuneration policies • Reviewing distribution channels Management
Contents
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Applying Solvency II
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• Product analysis
• Redefining the risk appetite
• Making sure models are viable
• Review of evaluation policies (performance)
• Recruitment and retention of key personnel
Short term objectives
• Defining risk budgets for each product
• Improving data used for modelling
• Balanced portfolios – more diversification
• Creating mechanisms to identify unexpected events
Medium term objectives
Contents
Thank you!