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Solvency ii Association1200 G Street NW Suite 800 Washington, DC 20005-6705 USATel: 202-449-9750 www.solvency-ii-associati...
Thesame time, Fitch Ratingsbelievesthat SolvencyII may significantlyincreasethecapital and complianceburden of the Europea...
5. TheOmnibusII draft DirectivegivestotheEuropeanCommissionthe (discretionary) powerstodefer theimplementationof significa...
Tothisend, the ESRB wouldprovidean earlywarningof system-widerisksthat may be buildingup and, wherenecessary, issuerecomme...
Asummary of the public submissionsreceivedcan be found at:http:/ / ec.europa.eu/ internal_market/ consultations/ docs/ 200...
http:/ / ec.europa.eu/ internal_market/ finances/ committees/ index_en.htm#packageLEGAL ELEMENTSOF THE PROPOSALGiven that ...
Consultation Paper on the Proposal for Quantitative ReportingTemplatesfor Financial Stability Purposes EIOPA_CP_11/ 011,21...
2) Groupswith assetswithmore than EUR 6 bn in balancesheet total.In order tokeep thesample composition more stableover tim...
QG = applicablequarterlyfor groupsDS= publicly disclosedtemplates(annually), for soloundertakingsDG = publiclydisclosedtem...
Solvency ii Associationwww.solvency-ii-association.com
Solvency ii Associationwww.solvency-ii-association.com
Tofind more:https://eiopa.europa.eu/ consultations/ consultation-papers/ index.htmlSolvency ii Associationwww.solvency-ii-...
Solvency II SpeakersBureauTheSolvencyII Association hasestablishedthe SolvencyII SpeakersBureau for firmsand organizations...
C.Want tounderstand thechallengesand the opportunitiesafter theSolvencyii Directive.This course ishighlyrecommendedfor sup...
Important DefinitionsValue-at-Riskin SolvencyIIAuthorisationCorporateGovernanceGovernanceFunctionsRiskManagementCorporateG...
TheValue-at-RiskMeasureCalibratedtoa 99.5% ConfidenceLevel over a 1-year Time HorizonTheStandardApproachTheInternal Models...
Parent UndertakingsOutsidethe Community - Verification ofEquivalenceParent UndertakingsOutsidethe Community - Absence ofEq...
Competing withBanksLearningfrom theBasel ii FrameworkRegulatoryArbitrage:AMajorRisk for Countriesthat seeComplianceasan Ob...
Solvency ii Associationwww.solvency-ii-association.com
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Solvency ii News February 2012

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Solvency ii Association
http://www.solvency-ii-association.com

We are pleased to announce our updated Distance Learning and Online Certification programs:
1. Certified Solvency ii Professional (CSiiP) Distance Learning and Online Certification Program
http://www.solvency-ii-association.com/CSiiP_Distance_Learning_Online_Certification_Program.htm

2. Certified Solvency ii Equivalence Professional (CSiiEP) Distance Learning and Online Certification Program
http://www.solvency-ii-association.com/CSiiEP_Distance_Learning_Online_Certification_Program.htm

Register to receive Solvency II / Omnibus II related alerts, opportunities, updates, our monthly newsletter and limited time offers for our Solvency II / Omnibus II Training and Certification programs:
http://forms.aweber.com/form/28/1910009328.htm

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Solvency ii News February 2012

  1. 1. Solvency ii Association1200 G Street NW Suite 800 Washington, DC 20005-6705 USATel: 202-449-9750 www.solvency-ii-association.comSolvency II News, February 2012Dear member,There is an interestingdevelopment.For years, theUnited Kingdom wasleadingthe SolvencyIIdevelopmentsin many aspects.After thevetoof David Cameron someweeksago, UK looksisolatedand unableto influencetheEU rules,puttingitsinsuranceindustry at a competitivedisadvantage.Britain reallywantstorelax the capital treatment under SolvencyII oflong-term life insurancecontractssuch asannuitiesthat are mostly soldintheUK than in anyother EU country. This hasbecome reallydifficultnow, asthere is a “tit for tat” (equivalent retaliation) approach in the EU.From the game theory, weknowthe rules:Unlessprovoked, alwayscooperate. If provoked, retaliate.Politicians…EIOPA - theEuropean Insuranceand Occupational PensionsAuthorityhasa hard timetodecidewhat todo withthemore than 3,000commentsthat make clearthepension industry’s responseto the challengethat aSolvencyII type regime should be applied to fundeddefinedbenefitpensions.Pensionsprofessionalstry hard to avoid a regime designedfor insurancecompanies.There is another problem… there wouldnot be enough actuaries inEurope to deal withtheworkload.Solvency ii Associationwww.solvency-ii-association.com
  2. 2. Thesame time, Fitch Ratingsbelievesthat SolvencyII may significantlyincreasethecapital and complianceburden of the European captivemarket.Captivesin theEU need better risk management and governancefunctions,better qualityand / or additional etc.Thesame time, weare expectingthe report (ordered by theDodd-FrankAct) from theUS Federal InsuranceOffice(FIO) within theU.S.Department of Treasury, that will explain how the United Stateswillmodernize and improve insuranceregulation.TheUS insuranceand reinsuranceindustry isconcerned that theregulatorysystems in other countrieswill put firmsin theStatesat adisadvantage.Dear member,Todaywemust alsoremember the changesafter the Omnibus2 draftDirective. It is time tounderstand better some important parts.TheOmnibusII draft Directiveamendsimportant partsof the SolvencyII Directive:1. TheOmnibusII draft Directivechangesthe implementationdatefrom the31stof October 2012tothe1stof January2013.2. TheOmnibusII draft Directivereplacesthe “implementingmeasures”with the“delegated acts” and the “implementingtechnicalstandards”. Some monthsbefore, wewereexpectingLevel 2 implementingmeasuresthat wouldtake the form of eithera Directiveor a Regulation.After theOmnibusII draft Directiveweare expectingdelegated actsand implementingtechnicalstandards.3. TheOmnibusII draft Directivereplacesall referencestoCEIOPSwith referencestoEIOPA4. TheOmnibusII draft Directiveintroducesnew powersfor EIOPASolvency ii Associationwww.solvency-ii-association.com
  3. 3. 5. TheOmnibusII draft DirectivegivestotheEuropeanCommissionthe (discretionary) powerstodefer theimplementationof significant featuresof SolvencyII.Experienceof the financial crisishasexposed important failuresinfinancial supervision. President Barrosothereforerequested a group ofhigh level experts, chaired by Mr Jacquesde Larosière, to makeproposalstostrengthenEuropean supervisory arrangements.TheGroup presented itsreport on 25February 2009.Building on its recommendations, the Commission set out proposals fora new European financial supervisory architecture in its Communicationtothe Spring European Council of March2009.TheCommission presented itsideasin more detail in itsCommunication of May2009whichproposed:-Establishinga European System of Financial Supervisors(ESFS), consistingof a network of national financial supervisorsworkingin tandem withnew European SupervisoryAuthorities(ESAs), created bytransformingthe existingEuropean supervisorycommitteesintoaEuropean BankingAuthority (EBA), a European InsuranceandOccupational PensionsAuthority (EIOPA), and a European Securitiesand MarketsAuthority (ESMA), therebycombiningthe advantagesof anoverarchingEuropean frameworkfor financial supervision withtheexpertiseof localmicro-prudential supervisorybodiesthat are closest totheinstitutionsoperating in their jurisdictions;and-Establishinga European Systemic RiskBoard (ESRB), tomonitor andassesspotential threats tofinancial stability that arise from macro-economicdevelopmentsand from developmentswithin the financialsystem asa whole.Solvency ii Associationwww.solvency-ii-association.com
  4. 4. Tothisend, the ESRB wouldprovidean earlywarningof system-widerisksthat may be buildingup and, wherenecessary, issuerecommendationsfor action to deal withtheserisks.TheCommunication alsoconcluded that in order for the ESFS to workeffectively, changestothe financial serviceslegislationwouldbenecessary, in particular toprovidean appropriatescope tothemoregeneral powersprovided for in the individual regulationsestablishing theauthorities,ensuring a more harmonisedset of financial rules through thepossibilityto develop draft technical standardsand facilitatethesharing,wherenecessary, of micro-prudential information.Consultation of the interested partiesTwoopen consultationswereconducted in thedevelopment of theseproposals.Firstly, followingthereport of thehigh-level group chairedby JacquesdeLarosière and thepublicationof the 4March2009CommissionCommunication, theCommission organiseda first consultation from 10Marchto10April 2009asinput to itsCommunication on FinancialSupervision in Europe publishedon 27May 2009.Asummary of the public submissionsreceivedcan be found at:http:/ / ec.europa.eu/ internal_market/ consultations/ docs/ 2009/ fin_supervision/ summary_en.pdfSecondly, from 27Mayto 15July 2009, the Commission organisedanotherconsultation, invitingall interestedpartiesto comment on themore detailed reformspresentedin theCommunication onFinancialSupervision in Europe of 27May2009.Theresponsesreceivedwerefor the greater part supportiveof thesuggestedreforms,with commentson detailed aspectsof theproposedESRB and ESFS.Solvency ii Associationwww.solvency-ii-association.com
  5. 5. Asummary of the public submissionsreceivedcan be found at:http:/ / ec.europa.eu/ internal_market/ consultations/ docs/ 2009/ fin_supervision_may/replies_summary_en.pdfAdditionally, a Commission ServicesStaff WorkingPaper waspublishedon 23September 2009to preview the possibleareaswhereamendmentstosectoral legislationmay be necessary. The workingpaper can befoundat:http:/ / ec.europa.eu/ internal_market/ finances/ docs/ committees/ supervision/ 20090923/ sec2009_1233_en.pdfIMPACT ASSESSMENTTheMayCommissionCommunicationon Financial Supervision inEurope wasaccompaniedby an impact assessment analysing themainpolicy optionsfor establishingthe ESFS and ESRB.Asecond impact assessment accompaniedthe legislativeproposals,examiningthe optionsin more detail.Thesecond impact assessment analysed theoptionsfor the appropriatepowersfor the authoritiesto worktowardsachievinga singleset ofharmonised rulesand concludedthat thiscapacitywouldbe rightlylimitedtothoseareasto be defined in forthcoming sectoral legislation,and identifiedsuch potential areas.Additionally, in developingthedraft technicalstandardsthemselves,theauthoritiesshould undertake appropriateanalysisof potential relatedcostsand benefits and consult stakeholdersbeforesubmitting them totheCommission.Thesecond impact assessment report isavailable at:Solvency ii Associationwww.solvency-ii-association.com
  6. 6. http:/ / ec.europa.eu/ internal_market/ finances/ committees/ index_en.htm#packageLEGAL ELEMENTSOF THE PROPOSALGiven that changesneed to be introduced intoexistingDirectivestoensure thedevelopment of a singlerulebook, an amending Directiveisthemost appropriate instrument. ThisamendingDirectiveshould havethesame legal basisasthe Directivesit amends.TranspositionMemberStatesshall adopt and publishthe laws,regulationsandadministrativeprovisionsby 31December 2012at the latest.Theyshall forthwithcommunicate totheCommissionthetext of thoseprovisionsand a correlationtablebetweenthoseprovisionsand thisDirective.Theyshall applythoseprovisionsfrom 1January 2013.When Member Statesadopt thoseprovisions,theyshall contain areferenceto thisDirectiveor shall be accompaniedby such a referenceon theoccasionof their official publication. Member Statesshalldeterminehow such reference isto bemade.MemberStatesshall communicate totheCommissionthetext of themain provisionsof national law whichtheyadopt in thefield covered bythisDirective.Solvency ii Associationwww.solvency-ii-association.com
  7. 7. Consultation Paper on the Proposal for Quantitative ReportingTemplatesfor Financial Stability Purposes EIOPA_CP_11/ 011,21December 2011EIOPA welcomescommentson the Consultation Paper on thisproposalfor quantitativereportingtemplatesfor financial stabilitypurposes.Theconsultation includes:- thisConsultationPaper;- accompanyingSpreadsheets,and LOGs;- a Templatefor Comments.Publication of responsesAll contributionsreceived will be publishedfollowingthecloseof theconsultation, unlessyou request otherwisein therespectivefield in thetemplatefor comments.Astandard confidentialitystatement in an email messagewill not betreatedasa request for non disclosure.Aconfidential responsemay be requested from usin accordancewithEIOPA’srules on public accesstodocuments.We may consult you if wereceivesuch a request. Any decision wemake not todisclosetheresponseis reviewableby EIOPA’s Board ofAppeal and theEuropeanOmbudsman.General Reporting Requirements for FinancialStability Analysis PurposesApplicability of financial stabilityadd+on templatesThefollowingentitiesshall submit the information contained in thequantitativereportingtemplatesfor financial stability:1) Undertakingswith more than EUR 6bn in balancesheet total;Solvency ii Associationwww.solvency-ii-association.com
  8. 8. 2) Groupswith assetswithmore than EUR 6 bn in balancesheet total.In order tokeep thesample composition more stableover time,admissiontoand deletion from the sampleshall be phased in andphased out. This would mean that groups/undertakingswhosetotalbalancesheet is closeto thethreshold (EUR 6 bn ) shall not switchinand out every other year.Explanatory textApplicability of templatesUndertakingsand groupswithtotal balancesheet in excessof EUR 6bnshall submit theinformationcontained in the quantitativereportingtemplatefor financial stability.Solo insurance undertakings and groups beyond the EUR 6 bn balancesheet total threshold shall submit the same information, on the highestpossiblelevel of consolidation, for financial stability purposes.Any soloundertakingbeing member of a group whichreportsforfinancial stabilityanalysispurposesin aconsolidated manner (thereforeincludingthis very soloundertaking), shall not report (i.e. no doublereporting from both a group and a soloundertaking).For phasing in and out due the EUR 6 bn threshold the 6 months noticeis a minimum. As the principle shall be transparent, candidates will havemore timetoprepare.Overview on templates, applicability and frequencyQFS= applicableQuarterlyfinancial stability information:AFS= applicableAnnual financial stabilityinformationR meansthat red and yellow marked part of the templateis applicableS= applicableannuallyfor soloundertakingsG = applicableannuallyfor groupsQS = applicablequarterlyfor soloundertakingsSolvency ii Associationwww.solvency-ii-association.com
  9. 9. QG = applicablequarterlyfor groupsDS= publicly disclosedtemplates(annually), for soloundertakingsDG = publiclydisclosedtemplates(annually), for groupsRFF = applicableannuallyto each material ring_fenced fund, for soloundertakingsX meansthat thetemplateis applicableE meansthat the templateis applicablewith possibleexemptionsSolvency ii Associationwww.solvency-ii-association.com
  10. 10. Solvency ii Associationwww.solvency-ii-association.com
  11. 11. Solvency ii Associationwww.solvency-ii-association.com
  12. 12. Tofind more:https://eiopa.europa.eu/ consultations/ consultation-papers/ index.htmlSolvency ii Associationwww.solvency-ii-association.com
  13. 13. Solvency II SpeakersBureauTheSolvencyII Association hasestablishedthe SolvencyII SpeakersBureau for firmsand organizationsthat want to accesstheexpertiseofCertified Solvencyii Professionals(CSiiPs) and Certified SolvencyiiEquivalenceProfessionals(CSiiEPs).TheSolvencyII Association will be theliaison betweenour certifiedprofessionalsand theseorganizations,at no cost. We stronglybelievethat this can be a great opportunity for both, our certified professionalsandtheorganizers.Tolearnmore:www.solvency-ii-association.com/ Solvency_II_Speakers_Bureau.htmlCourse TitleCertified Solvency ii Professional (CSiiP):Preparing for the Solvency ii Directive of the EU (3 days)Objectives:This coursehasbeen designed toprovidewiththe knowledgeand skillsneeded to understand and support compliancewiththeSolvencyiiDirectiveof theEuropean Union.TargetAudience:This course isintendedfor decision makers, managers, professionalsand consultantsthat:A.Work in Insuranceor Reinsurancefirmsof EEAcountries.B.Work in Groups- Financial Conglomerates(FC), Financial HoldingCompanies(FHC), MixedFinancial HoldingCompanies(MFHC), InsuranceHolding Companies(IH C) - providing insuranceand/ orreinsuranceservicesin theEEA, whoseparent islocatedin acountry oftheEEA.Solvency ii Associationwww.solvency-ii-association.com
  14. 14. C.Want tounderstand thechallengesand the opportunitiesafter theSolvencyii Directive.This course ishighlyrecommendedfor supervisorsof EEA countriesthat want to understand how countriesseeSolvencyII asa CompetitiveAdvantage.This course is also recommended for all decision makers, managers,professionals and consultants of insurance and/ or reinsurance firmsinvolvedin risk and compliancemanagement.About the CourseINTRODUCTIONTheEuropean Union’sLegislativeProcessDirectivesand RegulationsTheFinancial ServicesAction Plan (FSAP) of theEUExtraterritorialApplication of European LawExtraterritorialApplication of the SolvencyII DirectiveSolvencyii and theLamfalussyProcessLevel 1: FrameworkPrinciplesLevel 2: Detailed Technical MeasuresLevel3: StrengtheningCooperationAmong RegulatorsLevel 4: EnforcementWeaknessesof SolvencyIFrom SolvencyI toSolvencyIISolvencyii PlayersSolvencyii ObjectivesTHE SOLVENCY II DIRECTIVEAUnified LegislativeBasisfor Prudential Regulation of InsurersandReinsurersRisk-BasedCapitalAllocationScope of theApplicationSolvency ii Associationwww.solvency-ii-association.com
  15. 15. Important DefinitionsValue-at-Riskin SolvencyIIAuthorisationCorporateGovernanceGovernanceFunctionsRiskManagementCorporateGovernanceand Risk Management - Level 2Fit and proper requirementsfor personswhoeffectively run theundertakingor haveother key functionsInternal ControlsInternalAuditActuarial FunctionOutsourcingBoard of Directors:Role and Solvencyii Responsibilities12Principles– System of Governance (Level 2)PILLAR 2SupervisoryReview Process(SRP)Focuson Risk Management and Operational RiskOwn Risk and SolvencyAssessment (ORSA)ORSA- TheInternal Assessment ProcessORSA- TheSupervisoryToolORSA- Not a Third SolvencyCapital RequirementCapital add-onPILLAR 3DisclosureRequirementsTheSolvencyand Financial Condition Report (SFC)PILLAR IValuationOf AssetsAnd LiabilitiesTechnicalProvisionsTheSolvencyCapital Requirement (SCR)Solvency ii Associationwww.solvency-ii-association.com
  16. 16. TheValue-at-RiskMeasureCalibratedtoa 99.5% ConfidenceLevel over a 1-year Time HorizonTheStandardApproachTheInternal ModelsTheCollectionofAdditional HistoricalDataExternal DataThe Minimum Capital Requirement (MCR)Non-Compliancewiththe Minimum Capital RequirementNon-CompliancewiththeSolvencyCapital RequirementOwn FundsInvestment RulesINTERNAL MODEL APPROVALCEIOPSLevel 2 - Testsand Standardsfor Internal ModelApprovalCEIOPSLevel 2 - The procedure tobe followedfor the approval ofan internal modelInternal ModelsGovernanceGroup internal modelsStatistical qualitystandardsCalibrationand validationstandardsDocumentation standardsSOLVENCY II, GROUP SUPERVISION AND TH IRD COUNTRIESSolvencyI: SoloPlusApproachGroup Supervisionunder SolvencyIIRightsand dutiesof the group supervisorGroup Solvency - Methodsof calculationMethod1(Default method):Accounting consolidation-basedmethodMethod2 (Alternative method): Deduction and aggregationmethodSolvency ii Associationwww.solvency-ii-association.com
  17. 17. Parent UndertakingsOutsidethe Community - Verification ofEquivalenceParent UndertakingsOutsidethe Community - Absence ofEquivalenceThehead of thegroup isin theEEA and the third country regimeis not equivalentThehead of thegroup isin theEEA and the third country regimeis equivalentThehead of thegroup isoutsidethe EEAand the third country isnot equivalentThehead of thegroup isoutsidethe EEAand the third countryregimeisequivalentSmall and Medium-SizedInsurers:TheProportionalityPrincipleCaptivesand SolvencyIIEQUIVALENCE WITH SOLVENCY II AROUND THE WORLDSolvencyii and Countriesoutsidethe European EconomicAreaTheInternationalAssociation of InsuranceSupervisors(IAIS)TheSwissSolvencyTest (SST) and Solvencyii:Solvencyii and theOffshoreFinancial Centers(OFCs)Solvencyii and theUSASolvencyii and theUS NationalAssociation of InsuranceCommissioners(NAIC) - The Federal InsuranceOffice createdunder the Dodd-Frank Wall Street Reform and ConsumerProtectionAct in theUSA, and the ORSAin theUSAFROM THE REINSURANCE DIRECTIVE TO THE SOLVENCY IIDIRECTIVEDirective2005/ 68/ EC of 16November 2005on Reinsurance- TheReinsuranceDirective(RID)CLOSINGTheImpact of Solvencyii OutsidetheEEAProvidingInsuranceServicestotheEuropean ClientSolvency ii Associationwww.solvency-ii-association.com
  18. 18. Competing withBanksLearningfrom theBasel ii FrameworkRegulatoryArbitrage:AMajorRisk for Countriesthat seeComplianceasan Obligation, not anOpportunityBasel II, Basel III, SolvencyII and RegulatoryArbitrageChallengesand Opportunities:What is nextRegulatoryShopping after SolvencyIITolearnmore about theonlineexam you may visit:www.solvency-ii-association.com/ CSiiP_CSiiEP_Frequently_Asked_Questions.pdfwww.solvency-ii-association.com/ CSiiP_CSiiEP_Certification_Steps.pdfTolearnmore about thecourse:www.solvency-ii-association.com/ Certified_Solvency_ii_Training.htmSolvency ii Associationwww.solvency-ii-association.com
  19. 19. Solvency ii Associationwww.solvency-ii-association.com

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