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Solvency and Actuarial Issues Solvency and Actuarial Issues Subcommittee Information SessionSubcommittee Information Session
6 March 2009Rob Curtis - Chair, Solvency & Actuarial Issues Subcommittee
IAIS Triannual Meetings, March 2009
Recent developments in the Solvency and Actuarial Issues Subcommittee 26 March 2009
Presentation OverviewPresentation Overview
• International Solvency Requirements within the IAIS Framework for Supervision
• Recently adopted standards and guidance– Structure of regulatory capital requirements– Use of internal models for regulatory capital purposes– Enterprise risk management for capital adequacy and solvency
purposes
• Current work in progress– Structure of capital resources for solvency purposes– Valuation of assets and liabilities for solvency purposes– Investments
• Future work– Extension of solo level standards and guidance to groups– Opt-in for Internationally Active Insurance Groups (IAIGs)– Review of the Insurance Core Principles (ICPs)
Recent developments in the Solvency and Actuarial Issues Subcommittee 36 March 2009
Solvency requirements are integral in the Solvency requirements are integral in the Framework for insurance supervisionFramework for insurance supervision
Preconditions
Regulatory requirements
Supervisory assessment
LEVEL 1
LEVEL 2
LEVEL 3 Supervisory assessment and intervention
Basic conditions for the effective functioning of
the insurance supervisory authority
the insurance sector and insurance supervision
Financial Governance Market conduct
Common Solvency Structure and Standards
Framework for Insurance Supervision
Recent developments in the Solvency and Actuarial Issues Subcommittee 46 March 2009
Standard setting activities aim at global Standard setting activities aim at global convergence of supervisory practicesconvergence of supervisory practices
Standards
Insurance Core Principles
Guidance papers Issues papers
Supervisory papers Supporting papers
Recent developments in the Solvency and Actuarial Issues Subcommittee 56 March 2009
ISRs: a comprehensive and cohesive set of ISRs: a comprehensive and cohesive set of solvency assessment documentationsolvency assessment documentation
International Solvency Requirements (ISRs)
ISR 1
Capital requirements
(adopted)
ISR 2
Capital resources
ISR 3
Valuation of assets
& liabilities
ISR 4
Investments
ISR 5
Enterprise risk
management (adopted)
ISR 6
Internal models
(adopted)
STAN
DA
RD
S
ISR 1
Capital requirements
(adopted)
ISR 2
Capital resources
ISR 3
Valuation of assets
& liabilities
ISR 4
Investments
ISR 5
Enterprise risk
management (adopted)
ISR 6
Internal models
(adopted)
GU
IDA
NC
E PA
PER
Recent developments in the Solvency and Actuarial Issues Subcommittee 66 March 2009
Draft standard and guidance on capital Draft standard and guidance on capital resources for solvency purposesresources for solvency purposes
• Due for adoption in October 2009.• Papers will cover the following concepts:
– Capital resources should exceed capital requirements
– Consistent with total balance sheet approach– Having regard to quality of capital resources– Regime should establish criteria of assessing
suitability of capital resources
Recent developments in the Solvency and Actuarial Issues Subcommittee 76 March 2009
Draft standard and guidance on valuation of Draft standard and guidance on valuation of assets and liabilities for solvency purposesassets and liabilities for solvency purposes
• Joint working group between Solvency & Actuarial Issues Subcommittee and Insurance Contracts Subcommittee developing draft paper.
• Work will take into account developments in the IASB Phase II Insurance Contracts project.
• The established views of the IAIS are articulated in a positions paper - Market consistent valuation
• Draft expected in October 2010.
Recent developments in the Solvency and Actuarial Issues Subcommittee 86 March 2009
Draft standard and guidance on investmentsDraft standard and guidance on investments
• Review of current standard on ALM and guidance on investment risk management.
• Paper will cover the following concepts:– Regulatory investment requirements should be
established which ensure sufficiency, liquidity and security of an insurer’s investment portfolio as a whole
– Approaches from ‘prudent person’ principles to quantitative limits.
– Governance of investments including ALM based on economic value
• Due for adoption in October 2010.
Recent developments in the Solvency and Actuarial Issues Subcommittee 96 March 2009
Issues paper on groupIssues paper on group--wide solvency wide solvency assessment and supervisionassessment and supervision
• Paper does not take any position but aims at considering issues and challenges in establishing a group-wide solvency assessment framework.
• The paper describes:– How solo supervision needs to be enhanced to consider
group effects– Possible approaches to group-wide supervision and
solvency assessment– Challenges and potential ways to address them
• Paper adopted by Technical Committee at the March 2009 triannual meetings – basis for future work.
Recent developments in the Solvency and Actuarial Issues Subcommittee 106 March 2009
Further WorkFurther Work
• Extend the solo level ISRs to groups• Review of the Insurance Core Principles
(ICPs)• Opt-in for Internationally Active Insurance
Groups– common international capital and solvency
standards– task-force to address this new focus for IAIS
Recent developments in the Solvency and Actuarial Issues Subcommittee 116 March 2009
Proposed ICP restructure under the Proposed ICP restructure under the ISRsISRs
International Solvency Requirements (ISRs)
ISR 1
Capital require-ments
ISR 2
Capital resources
ISR 3
Valuation of assets
& liabilities
ISR 4
Asset-liability &
investment mgmt
ISR 5
Enterprise risk mgmt
ISR 6
Internal models
STAN
DA
RD
SG
UID
AN
CE
PAPER
ISR 7
Supervisory review
ISR 8
Regulatory reporting
and disclosure
ISR 1
Capital require-ments
ISR 2
Capital resources
ISR 3
Valuation of assets
& liabilities
ISR 4
Asset-liability &
investment mgmt
ISR 5
Enterprise risk mgmt
ISR 6
Internal models
ISR 7
Supervisory review
ISR 8
Regulatory reporting
and disclosure
ICP
Valuation
ICP
Capital
ICP
Investments and risk management
ICPs
Note: Subject to Technical Committee endorsement of the 2009-2010 Roadmap
Recent developments in the Solvency and Actuarial Issues Subcommittee 126 March 2009
Sequenced development of Sequenced development of ISRsISRs
Oct 09
1. Standard and guidance on capital resources for solvency purposes
Standard and guidance on
• Valuation of assets and liabilities, incl technical provisions for solvency purposes
• Supervisory review and reporting
• Capital requirements and resources for groups
• ERM for groups
• use of internal models for groups
Oct 10June 10
1. (Revised) Standard and guidance on investments/ ALM for solvency purposes
Note: Subject to Technical Committee endorsement of the 2009-2010 Roadmap
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