Gain-Line & Solvency II Solvency II is the biggest ever exercise in bringing together insurers and re-insurers under one regulatory regime Solvency II Programme Slide
Solvency II is a set of principles and guidelines leading to best practice in risk management;
It is an Enterprise wide initiative that will impact all areas of the business;
Early adopters are helping Lloyd’s and the FSA set the bar for what is required in the market;
We can’t give you ‘ The Answer ’ , but only a framework to help provide ‘ An Answer ’ based on decisions your business need to make;
Numerous approaches are being adopted across the market and it is not a case of ‘ one size fits all ’ ;
Resources will be scarce and the deadline is unlikely to move;
The range and diversity of insurance operations means that a Solvency II solution will vary from company to company;
The eventual solution in each case will require a detailed initial assessment and a range of inputs from a number of different disciplines.
Gain-Line is a consortium of companies formed specifically to provide clients with focused Solvency II expertise and resources;
The details of the consortium members are contained within the Appendix.
The Gain-Line Consortium
CEO CA CIO CRO CFO Stakeholder Requirements There are many stakeholders with differing priorities that need to be integral to the Solvency II Programme Solvency II Programme Slide Key Objectives:- Chief Actuary – centralised and consistent modelling approach for all actuarial users for realistic ‘what-if’ and scenario planning; Chief Risk Officer – enterprise wide consistent risk management standards and transparent risk modelling approach; Chief Information Officer – robust IT governance with scalable modelling tools and techniques, with consistent approach to data controls and architecture; Chief Financial Officer – faster reporting timetable with consistent approach to financial and management information; Chief Executive Officer – enhanced business performance through risk based decision making and efficient allocation of capital.
Solvency II Components Programmes will be challenged to align a variety of different functions as Solvency II will impact all elements of the Business Slide Solvency II Programme (including Programme Office) Governance, Compliance & Comms Balance Sheet & Portfolio Management Governance & Oversight Documentation, Comms & Training External Reporting Standard Formula Portfolio Management Calculation Kernel Technical Provisions Assets & Asset Liability Management Internal Model/Risk Management ORSA & the 6 Tests Data Quality & Governance Solvency II Data Repository IT Systems & Processes Risk Management Systems & Data
Systems & Data Different organisations have different priorities for data within the Solvency II context Slide Source – Xchanging Survey, February 2011
The Regulator’s View Highlighted below is the regulator’s view on data Slide “ Firms must improve their data management and quality – we will assess firms’ plans and ensure that their project planning is robust”… FSA IMAP update on pre-application process – April 2010
FSA Guidance Highlighted below are extracts from the FSA’s guidance as to why firms must meet the minimum requirements Solvency II Programme Slide
Systems & Data
5.24 The Directive sets out high-level requirements for the statistical quality standards underlying the model. This requirement aims to ensure that the methodology underlying the model is sound. The standards apply to:
the methodology used to select, fit and, where appropriate, combine statistical distributions (probability distribution forecasts);
model dependencies and diversification effects;
risk mitigation techniques;
the treatment of financial guarantees and options; and
future management actions.
5.25 Firms seeking internal model approval will need to have accurate, complete and appropriate data, as well as be able to justify assumptions and judgment.
5.26 High quality data is essential for modelling. Firms should pay particular attention to this requirement as experience under the FSA’s existing regime has indicated that the current quality of data in many UK firms may fall short of both existing and Solvency II requirements. We recommend that firms review the following for internal and external sources of data:
Data collection processes to make sure all data items required are collected;
Data resolution to ensure data is stored and accessible at a level appropriate for the design of the internal model;
The quality of data to ensure data items are correct and validated as far as possible;
Access to data, to ensure it can be easily and accurately retrieved by relevant users. “
Source : FSA Insurance Risk Management : The Path to Solvency II, September 2009
Systems & Data The Systems & Data Workstream must deliver a scalable IT infrastructure with the data being Complete , Accurate and Appropriate Solvency II Programme Slide
Key Deliverables The Key Deliverables for Systems & Data workstream are highlighted below Solvency II Programme Slide
A robust data policy/governance document which defines the date policy and, key data owners and the link between the various data deliverables.
A repository which defines all of the key data elements required for Solvency II, and an explanation of the data elements and a verbal definition of each specific data element.
A definitive repository of each model input into the standard model.
Data Controls & Flow Diagrams
A DFD must be created for each input to the standard model, i.e. row of the Data Directory, and cross reference the Data Dictionary.
Data Controls Register
A complete register of all controls applied to the data as it transfers through the organisation. Controls should also be categorised to show their relevance and strength.
Data Flows & Controls Diagrams The Data Flows & Controls Diagrams (DFDs) pictorially represent how the data is manipulated and physically moves within the organisation Slide
The DFDs are created for each row on the Data Directory – i.e. for each Internal Model Input;
Best practice shows that it should cross-reference the Data Dictionary;
Overall data quality, control and governance can be seen by incorporating the data controls.
Key sectors; Insurance, Retail Banking, Investment Banking and Big 4 Consulting and Strategy;
Market discipline; Credit, Market and Operational Risk, Solvency II, Liquidity & Capital Management, Basel II, Economic Capital, Quantitative and Risk Strategy;
We typically place Senior Managers, Directors, Programme Directors & Managers, Head’s of and Project Managers;
We operate a search methodology whether working contingently or retained supported by a dedicated research function providing detailed market mapping and ensuring we stay in regular contact with our candidate community/key people.
CirclePeople Circle People are a boutique executive search firm operating across the FS Risk Management community Slide