1. Solvency 2
Mistakes, Action & Potential Impact
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2. A Quote:
“When I start off to find somebody, I find
them. That's why they pay me”.
Angel´s Eyes
in “The Good the Bad and the Ugly”
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3. What to do next?
Established solution.
Build everything yourself.
Use the Standard Formulae.
Outsource “blindly”.
Do nothing for now.
Outsource “wisely”.
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4. Common Mistakes
• Copy the competitors
• Rely on established solutions
• Avoid challenging the assumptions
• Rely on “static” or “old” decision making measures
• Not adopt a forward looking approach
• Embrace a “boxes-filling” mentality
• Do not know what they buy
• Very Bureaucratic “buy” decisions
• Intent constantly to extent preexisting tools (costs?)
• Buy software (learning, licenses, switching cost)
• Overlook the execution times
• Ignore “global picture”
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5. Potential Impact
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6. 4. Increase in M&A activity
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7. 5. Higher cost of capital?

8. 6. Focus on underwriting and
asset management
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9. 7. Fungibility of capital /
corporate structures
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10. Key Outstanding Debates
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11. Key Outstanding Debates
• 1) Reporting – the implications of Solvency 2 for
accounting profits and the balance sheet.
• 2) Equivalence – Bermuda and Switzerland to be
included in the first wave, United States excluded
• 3) Resources required to calculate and manage
Solvency 2 are significant and potentially scarce
• 4) The role of rating agencies
• 5) Solvency “2.0” – future development of the rules
• 6) Occupational pension funds remain excluded
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12. Steps for a successful
implementation
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13. Steps for a successful
implementation
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14. Assign risk governance roles
Design & install new decision-making roles.
Must determine how the tasks are to be divided.
Avoid duplication of roles and responsibilities.
Gain buy in by the management.
Each executive assumes a role only.
Decisions to be taken independently.
Decisions to be taken objectively.
Choose people fit for the roles.
Avoid frequent switching of duties and roles.
Collaboration between risk committees.
Define the procedures of the risk reporting system.
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15. Clarify the distribution of risk-
management responsibilities:
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16. Build the Three Pillars Modularly
Establish the Minimum Solvency Requirement
Pillar 1
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17. Pillar 2
Internal Control Principles
Pillar 2
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18. See the Big Picture
Pillar 1 Pillar 2 Pillar 3
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19. Is your gun loaded?
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20. Questions
For the full presentation please contact me:
stelios ioannides
stelios dot ioannides dot risk at gmail dot com
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