Tag Archives: Risk management

NAIC asks Treasury secretary to review EU-US covered agreement

The National Association of Insurance Commissioners has asked the new Treasury secretary to clarify provisions of the covered agreement reached between the United States and the European Union in response to the bloc’s Solvency II directive. 

The covered agreement deal negotiated by the U.S. Department of the Treasury under the Obama administration and the Office of the U.S. Trade Representative, announced on Jan. 13, aims to address the fact that the European Commission has not deemed the United States an equivalent jurisdiction, per the EU’s Solvency II directive outlining a risk-based capital regime for insurers and reinsurers in Europe.

Continue Reading “NAIC asks Treasury secretary to review EU-US covered agreement” at Business Insurance News

Flawed Solvency II risk margin is hurting consumers

Analysis by Willis Towers Watson finds the current formula is causing higher premium rates, reduced competition and poor value for consumers

LONDON, Thursday 16 March, 2017 — Willis Towers Watson has responded to a European Insurance and Occupational Pensions Authority (EIOPA) Discussion Paper on the upcoming review of Solvency II, where it has identified significant flaws in Willis-Towers-Watsonthe formula used to calculate the risk margin and recommended a fundamental review of its methodology and calibration.
Kamran Foroughi, Director at Willis Towers Watson, said: “We believe the high level of risk margin currently attached to long-term insurance products is resulting in higher premium rates and reduced competition, leading to worse value for consumers.”
Willis Towers Watson’s submission notes that the risk margin has become a much more material component of insurers’ balance sheets, leading to a number of challenges and changes in business practice, including:
• Asset Liability Matching. Insurers’ ALM challenges related to risk margin have been exacerbated by falling interest rates.
• Risk transfer. The bigger the risk margin relative to the rest of the technical provisions, the more insurers are incentivised to offload risk to reduce the risk margin.
This can be done via reinsurance to a company outside the EU which is not bound by Solvency II rules. Continue reading Flawed Solvency II risk margin is hurting consumers

Mutual LV= weighs merger or disposals as capital rules bite

One of Britain’s largest financial services mutuals has been involved in a secret hunt for a merger partner as a combination of tougher capital requirements and low interest rates hamper its profitability.

dddvtureSky News has learnt that LV=, which has nearly 6m UK customers across insurance, pensions and income protection products, has held aborted talks in recent months with Royal London, its fellow mutual, about a possible tie-up.

Those talks are said to have broken down amid a disagreement over the structure of a deal.

Continue Reading “Mutual LV= weighs merger or disposals as capital rules bite” at Sky News

Solvency II complicates captive strategies

The implementation of Solvency II in Europe has provided an additional risk management tool to owners of European captives, but at a cost, forcing risk managers to re-examine whether they are getting the best use out of their captives.confused-face-484x295

Solvency II, the European Union-wide risk-based capital rules for insurers and reinsurers, came into force in January 2016, and with it came new elements that have affected captives, for better or for worse.

“What we’re seeing as managers is an increased interest in strategic reviews and companies re-examining the captives to explore optimization opportunities and thus potentially…

Continue Reading “Solvency II complicates captive strategies ” at Business Insurance News

Bank of England defends implementation of Solvency II rules

The Bank of England has dealt a blow to UK insurers hoping for a quick fix to what they see as the most onerous aspects of EU capital requirements.

The insurance industry has been campaigning for a more lenient indexinterpretation of EU rules known as Solvency II. Some insurers have accused the central bank of “gold plating” the regulatory regime, which is supposed to be applied equally across the EU.

But in a speech to the Association of British Insurers on Tuesday, David Rule, the BoE’s head of insurance supervision, said its implementation of Solvency II had been “robust but proportionate” and played down the potential for immediate changes.

Continue Reading “Bank of England defends implementation of Solvency II rules” at Financial Times

Pensions: IORP II and the elephant in the room

After almost two years of negotiation, the revised European Union Directive on the Activities and Supervision of Institutions for Occupational Retirement Provision (IORP II) comes into effect today.newPic_4681_jpg_3388340b

Member States will now have two years to incorporate it into national law.

But what is IORP II? How will it impact on occupational pension provision in the UK? And what about the elephant in room – Brexit?

Background

IORP I came into effect in 2003, and lays down rules for activities carried out by IORPs (which, in the UK, are broadly employer-funded occupational pension schemes).

Continue Reading “Pensions: IORP II and the elephant in the room” at Lexology

Insurers warn of Solvency II impact

The capital regime for the insurance industry needs “fundamental” review, a committee of MPs has been told.

Legal & General and Prudential both appeared before the Treasury Select Committee yesterday (25 January) to criticise the Solvency II regime.

The cross-European regime came into effect a year ago and sets out how much capital insurance companies must hold to reduce the risk of insolvency.

Continue Reading “Insurers warn of Solvency II impact ” at FT Adviser News

At risk: the global nature of reinsurance

Local rules plus the effects of Solvency II may be limiting access of countries to the benefits of reinsurance, and this is a problem that needs fixing, says Frank Nutter of the Reinsurance Association of America.global-hands

Restricting access to reinsurance can have serious consequences for society. Take, for example, a big earthquake in Chile or in New Zealand of the recent past, where the influx of reinsurance after the event allowed for a remarkable restoration of the economy.a

If you localise reinsurance and don’t place the risk to global markets, as it is happening particularly in certain parts of Asia, you effectively exacerbate the problem. In addition to having to cope with the destruction of infrastructure, those countries may end up with a debilitated local re/insurance industry.

Continue Reading “At risk: the global nature of reinsurance” at Intelligent Insurer

Medical aid solvency ratios need to change

The debate about the solvency ratio for medical aids is nothing new.

The legislated requirement of 25% needs to be revisited to better-health-insurance-coverage-through-obamacare-ftrmove away from the one-size-fits-all scenario.

The Medical Schemes Act No 131 of 1998 requires that medical schemes, “shall at all times maintain its business in a financially sound condition”.

This means that the medical scheme has sufficient assets for generally conducting it business, providing for its liabilities at all times and for meeting prescribed solvency requirements of 25%.

Malta: a gateway to Europe

In a post-Solvency II world and against the backdrop of the UK’s leaving the EU, Malta can offer companies a robust regulatory regime, access to Europe and innovative structures such as protected cell special-malta-wallpapercompanies and ILS, Penny Hudson at Artex Risk Solutions tells Monte Carlo Today.

The attraction and benefits of Malta as a domicile are already established, although the jurisdiction is seeing potential enhancement due to the UK’s planned exit from the European Union as it will reap the rewards of its own EU membership and sustained investment in its regulatory regime, infrastructure and education system needed to support its fast-growing financial services sector.

That is the view of Penny Hudson, director and head of the Malta office at Artex Risk Solutions, the specialist in insurance management and alternative risk programmes.

Continue Reading “Malta: a gateway to Europe” at Intelligent Insurer News