liwmpc risk margin taskforce 2015 survey · • the survey was performed in june 2015 with 23...

LIWMPC Risk Margin Taskforce

2015 Survey

1

Contents

1) Introduction

2) Survey participants 3) Survey questionnaire and summarised answers 4) Survey results and key observations 5) Appendices (Detailed Charts)

2

Introduction

• This presentation summarises the results of the 2015 survey of life insurance stress margins for the purposes of determining regulatory capital requirements.

• The survey was performed in June 2015 with 23 companies participating. • It is intended that this survey will be conducted annually. • This presentation summarises the results of the 2015 survey of life insurance

stress margins for the purposes of determining regulatory capital requirements.

• Enquiries can be directed to the taskforce members:

• Briallen Cummings ([email protected]) • Brendan Counsell ([email protected]) • Chit Wai Wang ([email protected])

3

Survey Approach

• A range of questions were sent to insurers and responses were provided via email.

• Interpretation of the results: • We have not provided reasons or sought to understand why risk margins differ

between companies. • We sought clarification from some, but not all, companies. In some cases, the

results changed upon clarification. Please use care interpreting results. • A total of 23 companies responded to the survey, however the taskforce

elected to exclude 2 companies as their results were outliers and it did not appear that the survey had been filled in robustly. The 23 companies included in the survey are listed on page 5.

4

Survey Participants

AIA AMP Life BT Clearview CommInsure Challenger Hallmark HCF Life

Hannover Re Gen Re Macquarie Metlife MLC Munich Re NMLA OnePath

RGA Scor Re St. Andrews Suncorp Swiss Re TAL Zurich

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• Results are presented for large direct insurers, small direct insurers and reinsurers.

• Large direct insurers are defined as: • For retail risk, those with greater than $500m annual premium in-force at

31 March 2015. • For group risk, those with greater than $200m annual premium in-force at

31 March 2015.

Survey Categorisation

6

Retail Risk Group Risk

Small Direct Insurer 8 6

Large Direct Insurer 7 6

Reinsurer 5 5

Survey questionnaire and summarised answers

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Question 1

Q1A (i): When did you last change any of your insurance stress margins?

Q1A (ii) If you have recently changed any of your stress margins, which margins changed and what was the reason for the change?

No Change 2013 2014 2015

28% 22%

33%

17%

Several insurers changed the margins following annual review / annual experience investigations. Some explicitly noted changes to stress margins for group business due to perception of higher uncertainty.

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Question 2A

Q2A (i): How many years do you assume before you reprice retail business?

Q2A(ii): Do you assume the business is repriced to fully cover the impacts of the stresses?

2yrs 3yrs 4yrs 5yrs No re-pricing assumed Did not respond

10% 14%

38%

24%

10% 5%

Yes Not fully Did not respond

24%

71%

5%

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Question 2B

Q2B (i) & (ii): For group business, do you assume any level of automatic rollover at the current price? If so describe.

Yes No Did not respond

24% 29%

48%

6 respondents indicated some form of rollover is assumed. Approaches included: o Assume full rollover at current price due to low materiality of the group portfolio. o Determined on a scheme-by-scheme basis. o Include an allowance for the probability of retention at current premium rate.

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Question 2C

Q2C(i): Are you aware of the work of the Risk Margins Methodology Taskforce?

Q2C (iii) If not, is it because you are waiting on the final paper?

Q2C (ii) If so have you incorporated their suggested approach into your methodology for setting margins?


0%

100%

0%

Yes No Partially

5% 29%

57%


17% 50%

33%

Q2C (iv) Other – please state:

Concern from a small minority around subjectivity of the taskforce approach or that the proposed approach may be conservative.

10%

No but we plan to consider using it in future

6 companies have adopted or partially adopted the proposed methodology.

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Question 3

Q3A (i) & (ii): Are there remaining aspects where you think the interpretation of the standards is not clear? If so, what are they?

Q3B (i) & (ii): Are there any specific areas of the regulatory capital calculation that you would like more guidance on? If so, what areas do you think requires further guidance and who do you think should provide the guidance?

Yes No

29%

71% The interpretation aspects mentioned were fairly specific to individual companies. Amongst all the responses, some insurers were seeking specific guidance on

Lapse stresses

Combined Stress Scenario calculations

General feedback is that there is no need for more guidance at this stage (15 respondents). A minority of respondents thought that more guidance from APRA (on specific issues) and from the Actuaries Institute (on stress margins) is required.

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Survey Results

13

Introduction

Range of stress margins The range is similar to the last survey (conducted April 2014). In some cases where risk margins are very high, this reflects that the

margin is not material to the capital position of the company and therefore a very approximate approach has been used.

Interpretation of Graphs The bars on each chart indicate the average, minimum and maximum for

each stress margin and type of company (small, large, reinsurer).

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Random Stress Margins (Retail)

0%

20%

40%

60%

80%

100%

120%

140%

Small Large Reinsurer Small Large Reinsurer Small Large Reinsurer Small Large Reinsurer Small Large Reinsurer Small Large Reinsurer Small Large Reinsurer

Mortality TPD Trauma IP Incidence IP Termination IP Total CICP

Random Margins - Retail

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Random Stress Margins (Group)

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

Small Large Reinsurer Small Large Reinsurer Small Large Reinsurer Small Large Reinsurer Small Large Reinsurer Small Large Reinsurer

Mortality TPD GSC Incidence GSC Termination GSC Total CICP

Random Margins - Group

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Future Stress Margins (Retail)

0%

20%

40%

60%

80%

100%

120%



Future Margins - Retail

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Future Stress Margins (Group)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%



Future Margins - Group

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Lapse Stress Margins

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Retail Risk Group Risk Investment PAR

Lapse Margins - 2015

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Retail Risk Group Risk Investment PAR

Lapse Margins - 2014

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Appendices

Detailed charts comparing the latest survey results against previous year’s survey results

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Random Stress Margins (Retail)

0%

20%

40%

60%

80%

100%

120%

140%

Jul-1

5

Apr-

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Random Margins - Retail

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Random Stress Margins (Group)

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

Jul-1

5

Apr-

14

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Jul-1

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Jul-1

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Jul-1

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Random Margins - Group

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Future Stress Margins (Retail)

0%

20%

40%

60%

80%

100%

120%

Jul-1

5

Apr-

14

Jul-1

5

Apr-

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Jul-1

5

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Jul-1

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Future Margins - Retail

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Future Stress Margins (Group)

0%

20%

40%

60%

80%

100%

120%

Jul-1

5

Apr-

14

Jul-1

5

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Jul-1

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Apr-

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Jul-1

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Future Margins - Group

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liwmpc risk margin taskforce 2015 survey · • the survey was performed in june 2015 with 23...

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