sas for solvency ii

Copyr i g ht © 2012, SAS Ins t i tu t e Inc . A l l r ights reser ve d .

IMPLEMENTING SOLVENCY II

MORE INFORMATION

http://bit.ly/gJKFM4


AGENDA

1. Solvency II Objectives

2. Business & IT requirements

3. SAS Offering

4. Value & Benefits

5. Customer Successes

6. Why SAS?


SOLVENCY II COMPLIANCE

Solvency II Framework Directive issued November 25th, 2009

Implementation Date January 1st, 2014


SOLVENCY II REGULATORY GOALS

Definition

EU Directive that codifies and harmonizes the European

insurance regulation. Primarily this concerns the amount

of capital that insurance companies must hold to reduce

the risk of insolvency

Objectives

To deepen integration of the European insurance

market

To improve the international competitiveness of

European insurance and reinsurance companies

To promote better regulation through a principle-based

and risk sensitive solvency regime

To align capital requirements to a company‘s risk profile

To increase protection of policyholders and beneficiaries

To install risk awareness into governance, operations

and decision making


SOLVENCY II CHALLENGING TIMES

Flexibility and future developments to be considered

Excel-based implementations are not Solvency II compliant

Solvency II timelines

Framework Directive

Implementing measures

Transition into local law

Harmonisation of regulation

QIS 4 QIS 4.5 QIS 5

Level

Level 2

Level 3

Level 4

QIS

2008 2009 2010 2011 2012 2013 2014

from 2014 (?) on: meeting regulatory reporting requirements in their entirety


SOLVENCY II THE THREE PILLARS

Solvency II

Quantitative

Requirements

Qualitative Requirements

and Regulation

Market discipline and

transparency 1 2 3

Standard Model Approach

Internal Models

Group Solvability

ORSA Process

Risk Management Processes

Risk Governance, Compliance

Group-wide Reporting

External & Internal Reporting

Requirements

SFCR, RSR, QRT

Approach

Decision Making

and Strategy

Risk Identification

and Assessment

Risk

Mitigation

and Control

Reporting

and Monitoring

Ma

rke

t V

alu

e o

f A

sse

ts

Market Risk

Default Risk

Operational Risk

Underwriting Risk

Technical

Provisions

Capital

Requirement

(SCR/MCR)

Free Assets


AGENDA



3. SAS Offering

4. Value & Benefits


6. Why SAS?


SOLVENCY II DATA MANAGEMENT & SOFTWARE REGULATORY

REQUIREMENTS

Historized Solvency II

Data Management

Data Models and

Processes

Auditability

Governance, Data Quality,

Documentation, Traceability


SOLVENCY II DATA MANAGEMENT & DATA QUALITY REGULATORY

REQUIREMENTS


SOLVENCY II PROJECT CHALLENGES

Application

Infrastructure

Standard Model

Approach

Reporting

Branches &

Subsidiaries

Solution

Architecture

Establish a Solvency II Process and IT infrastructure, that fulfills all regulator requirements. Including:

completeness of IT processes, auditability and documentation

Integration with existing 3rd party actuarial modelling tools (e.g. Prophet, Igloo, …)

Data Management including development of required data marts

Capital requirement calculation according to the standard model approach for all branches an all risk

Regulatory reports for solo entities and at group level (QRT)

Consideration of all the methodological aspects modelled

Ability to analyze data marts for internal requirements (Risk Controlling)

Integration of internal model processes (Life, P&C)

Capital calculations according to the standard model approach

Group aggregation for all subsidiaries

Upgradeable and scaleable for future requirements

Configurable and flexible for future changes in regulatory requirements, e.g. Reporting

Data

Management

Auditability

Historized and version controlled Solvency II Data and Model Management

Data Models and processes

Risk Governance

Auditability

Data Quality, Documentation, Traceability

So

lven

cy I

I T

op

ics


AGENDA



3. SAS Offering

4. Value & Benefits


6. Why SAS?


SAS FOR SOLVENCY II END-TO-END INFRASTRUCTURE


Data Management

Data Models

and processes

Auditability

Governance, Data Quality, Documentation, Traceability

SCR - Internal model approach

Group Risk Assessment

(Group Aggregation)

Incl. Counterparty default risks,

operational risks

and other risks

Market

Life

P&C

Health

SCR – Standard model approach


(Group Aggregation)


operational risks

and other risks

Market

Life

P&C

Health

For the ability of

managing simulations,

models and predictions

Internal Reporting

for Regulatory Purpose and

Public Disclosure

(QRT-Reports, ORSA,

SFCR, RSR)

External Reporting

Data Management Risk Quantification Reporting



Risk Quantification Reporting


Data Management

Data Models

and processes

Insurance Data Model

Contains all the relevant core data (Technical

Provisions, Financial Data, …)

Historisation / Archival Storage

Risk Model

Data Dictionary

Solvency II Configuration Data

Data Extracts

Data structure according to organizational chart

Reporting Model

Historized database for QRT-Reports

and internal reporting

Transparent, traceable dataflow

Aggregation per due date

Automatic transfer risk calculation results

Data Quality Data Integration Interfaces to all usual data

sources

Documentation of the

ETL processes

Programming via GUI

or direct coding

Tools for Data Quality Checks

Documentation of the Data

Quality processes

Auditability


Data Management




Insurance Data Model


Data Management

Data Models

and Processes

Auditability


Data Management




Alerts

Expression

Rule

Data Quality Process

Description

Requirements

Business Term

… defines terms,

correlations and

responsible personas

according to their role

(Data Dictionary).

… combines terms with

data, defines validation

rules and models

(Monitoring Processes)

… manages the results of

the rules validation in the

dashboard and is informed

on discrepancies by

alerts.

Business User Technical Analyst Data Steward


Data Management

Data Models

and processes

Auditability


Data Management





Data Management

Data Models

and processes

Auditability


Data Management

Data Quality Process



Reporting Data Management

Functional Components

Risk Reporting

Firmwide Risk Aggregation

Underwriting Risk

• P&C Insurance

• Life

• Health

Market Risk

Historized Data Storage

Adj BSCR

SLT

Mortality

Longevity

Disability/ Morbidity

Lapse

Expenses

Revision

Op

Interest rate

Equity

Property

Spread

Currency

Concen-tration

Illiquidity

SCR

Health Default Intangible

CAT

Premium Reserve

Lapse

Non-Life Market

Non SLT Health

Premium Reserve

Lapse

CAT Mortality

Longevity

Disability/ Morbidity

Lapse

Expenses

Revision

CAT

Life

= included in the adjustment for the

loss-absorbing capacity of technical

provisions under modular approach

Auditability


Risk Quantification



Reporting Data Management

Functional Components

Risk Reporting

Firmwide Risk Aggregation

Underwriting Risk

• P&C Insurance

• Life

• Health

Market Risk

Historized Data Storage

Auditability


Risk Quantification



Risk Quantification Data Management

Reporting

External and internal reporting

Regulatory QRT-Reports

Scenarios and simulations

Reporting Tools

Web- Interface for Developing and Displaying Reports

Export as Flat-Files supporting XBLR-Format

OLAP Functionality (drill-down)

Ad-Hoc Analysis-Tools (MS Office Add-In, Enterprise Guide)

For managing simulations,


Internal Reporting

for Regulatory and Public

Disclosure

(QRT-Reports, ORSA,

SFCR, RSR)

External Reporting

Auditability


Reporting



Reporting Data Management Risk Quantification

Internal modelling &

Risk Aggregation

Risk Management / ORSA

Pillar 3

Disclosure

Standard & Ad Hoc

Regulatory Reports

E.R.M.

SAS Metadata Management

SAS

Data

Quality

Standard Formula

Supporting ORSA: SAS Workflow Engine

EGRC Data Model

Integration actuarial tools

Busines Dictionary IT Catalogue Trace Mapping

Lineage Mapping Data Profiling / Data Auditing Governance Workflows

SAS Insurance Data Model

Operational

Data sources

& Portfolio

Management

Systems

Data Sources SAS Risk & Capital Analytics SAS Reporting

Risk Reporting Repository Solvency II Data Mart


SAS FOR SOLVENCY II IT ARCHITECTURE


SAS FOR SOLVENCY II INTEGRATING THE THREE PILLARS

Solvency II

Quantitative

Requirements


and Regulation


transparency 1 2 3

Standard Model Approach

Internal Models

Group Solvability

ORSA Process

Risk Management Processes

Risk Governance, Compliance

Group-wide Reporting

External & Internal Reporting

Requirements

SFCR, RSR, QRT

Approach

Decision Making

and Strategy

Risk Identification

and Assessment

Risk

Mitigation

and Control

Reporting

and Monitoring

Ma

rke

t V

alu

e o

f A

sse

ts

Market Risk

Default Risk

Operational Risk

Underwriting Risk

Technical

Provisions

Capital

Requirement

(SCR/MCR)

Free Assets


SAS FOR SOLVENCY II INTEGRATING THE THREE PILLARS

Solvency II

Quantitative

Requirements


and Regulation


transparency 1 2 3

SAS Risk Management

for Insurance

Calculate SCR & MCR

Calculate technical provisions

Monitoring of solvency requirements

Quantify operational risk

Valuation of assets

Aggregation

Stress test & back test

SAS Enterprise Governance,

Risk & Compliance

Support Own Risk & Solvency

Assessment

Develop supervisory review process

Refine risk management process

Develop policy framework

Define risk appetite

Develop risk based performance

measures

Develop organization – people,

culture competencies

SAS Risk Management

for Insurance

QRT

Internal Reporting (SFCR)

External Reporting (RSR)

ORSA Reports

SAS Data Management Data Integration, Data Quality, Data Models and Monitoring


SAS FOR SOLVENCY II IMPLEMENTING SOLVENCY II

SAS RMfI is an end-to-end solution integrating all relevant data management processes, based on a

dedicated insurance data model for Solvency II

Solvency II standard model approach fully supported

Out-of- the-box parametrisation, based on input-cashflows

Rapid implementation of new requirements from auditors and regulatory bodies (e.g. EIOPA)

Group view and group aggregation through standardized quantitative external reports (QRTs)

Standardized for integrating 3rd party risk modelling tools (e.g. Prophet, Igloo, MoSes, …)

Implementing a group structure in entity models

Providing information to foreign subsidiaries for their own individual usage

Incorporating results from a foreign subsidiary to support the group aggregation

Upgradeability: the SAS RMfI solution s perfectly suited for the implementation of (partial) nternal models

Distributed Architecture, including mainfram and heterogenuously systems for metadata management

Automatisation and acceleration of processes by omission of manual interaction

Data delivery on cashflow basis (+ additional information)

Implementing the standard approach with SAS RMfI for every domestic and international subsidiary

Groupwide Governance

Toolset for the validation of data quality and documentation of the data quality processes

Full auditability of the Solvency II-data management processes

Application

Infrastructure

Standard Model

Approach

Reporting

Branches &

Subsidiaries

Solution

Architecture

Data

Management

Auditability

So

lven

cy I

I T

op

ics


SAS FOR SOLVENCY II FULL FLEXIBILITY FOR DIFFERENT PROJECT SCENARIOS

Historised Solvency II

Data Management

Data Models

and Processes

Auditability


SCR - internal model

approach


(Group Aggregation)


operational risks

and other risks

Market

Life

P&C

Health

SCR – standard model

approach Group Risk Assessment

(Group Aggregation)


operational risks

and other risks

Market

Life

P&C

Health

for the ability of

managing simulations,


Internal Reporting

for Regulatory Purpose and

Public Disclosure

(QRT-Reports, ORSA,

SFCR, RSR)

External Reporting

Data Management Risk Quantification Reporting

Historisiertes Solvency II

Datenmanagement

Datenmodelle und -prozesse

Datenmanagement


Data Management

Data Models

and processes

Data Management

SCR nach internem Modell

Konzernrisikobewertung

(Gruppenaggregation)

Inklusive Kredit-, operationeller

und sonstiger Risiken

Marktrisiko

Leben

Komposit

Kranken

SCR nach Standardansatz

Konzernrisikobewertung

(Gruppenaggregation)

Inklusive Kredit-, operationeller

und sonstiger Risiken

Marktrisiko

Leben

Komposit

Kranken

Risikoquantifizierung

SCR - Internal model approach


(Group Aggregation)


operational risks

and other risks

Market

Life

P&C

Health

SCR – Standard model approach


(Group Aggregation)


operational risks

and other risks

Market

Life

P&C

Health

Risk Quantification

zur Steuerung der

Simulations-,

Modellierungs-,

und Vorhersagefähigkeit

Internes

Berichtswesen

für die Aufsicht

QRT-Meldungen, ORSA

Externes

Berichtswesen

Berichtswesen

For managing simulations,


Internal Reporting

For Regulatory and Public

Disclosure

(QRT-Reports, ORSA,

SFCR, RSR)

External Reporting

Reporting

Auditability

Governance, Data Quality, Documentation, Traceability Auditability



AGENDA



3. SAS Offering

4. Value & Benefits


6. Why SAS?


VALUE ACHIEVE SOLVENCY II COMPLIANCE WITH SAS

Protection of investemnts

The sophistication of the SAS solutions provides a robust technological basis for enterprise risk management – moving beyond

Solvency II – based on a single, consistent, integrated and adjustable platform.

Risk based performance management under constraints of maximum profitability and efficiency

Fullfillment of Governance Requirements

based on SAS Risk Management for Insurance

• Integrated Risk Management System

• Quality assurance of all data

• Reproductibility of all risk calculations

• Process automation and establishment of consistent

internal and external reporting standards

• Documentation

Reducing costs and efforts

through industrialized processes, analysis and standard

reports

Reduction of project risks

by relying on proven SAS technology and by establishing

consistant internal reporting standards and automated

processes

Faster implementation

by relying on a proven Risk Management Framework

Quality assurance of all data

of the relevant decision making processes for all business

areas

Fullfilment of technical requirements

via an integrated Risk Management system for Data

Management, Risk Analytics and Reporting supporting

industrialisesd processes for risk quantification

Supporting all three pillars of Solvency II in a single framework, incl. Data Management

Calculation of group solvability incl. Group aggregation

Simulations and scenario analysis


BUSINESS

BENEFITS BEYOND COMPLIANCE WITH SAS

A complete solution to comply with the entire Solvency II regulations

Fast, reliable and forward looking information for making high value

strategic decisions

A basis for risk adjusted / value based management & for optimizing

decisions like reinsurance programs or investment mix

Perform complex analysis on

how the company is invested

Optimize capital allocation

Protect the company against

unwanted future losses and

realize the expected return by

optimizing investment

strategies, taking into account

risk-capital constraints

Improve the company‘s rating

and reduce the costs of capital

in order to increase the profit

Perform market-consistent

valuation of the total balance

sheet

Reduction of earnings volatility

with better risk management

due to the quantification of the

various risk types

CFO

Avoids risk of failure in

implementing a robust risk

management framework

Meets qualitative regulatory

demands like transparency and

full documentation of the models

and the risk management

processes

Supports risk management

beyond Solvency II, i.e.

implementing economic capital

models

Reduces earnings volatility and

improves financial soundness of

company by anticipating future

risks and mitigating them

Prevents losses – identifies,

quantifies and prioritizes risks

facing the company (via risk

dashboards and reporting)

Promote risk culture within

company – measures and

monitors risk adjusted

performance of the company

CRO

Directly align the risk strategies

with the sales and marketing

strategies, i.e. identify

unprofitable customers,

unprofitable products,

unprofitable regions, etc.

Optimize new business

targets, taking into account

risk-capital constraints,

customer segmentation and

customer value management

Improve competitiveness off

the products

Head of Sales/Marketing

Provides a robust technology

for enterprise risk management

– beyond Solvency II, with a

single, integrated and auditable

platform

Reduces implementation

project risks by providing ready

to use and easily customized

solution

Removes integration issues by

providing the entire solution on

single technology platform

Reduces time and cost by

shortening implementation

cycles and delivering faster

ROI

Protects investments already

made by building around the

existing solutions

CIO

Increase shareholder confidence by reducing volatility and

improving profitability of the company

Increase policyholder confidence by improving the financial

soundness and stability of the company

Grow the company by making products and services more

competitive

CEO


AGENDA



3. SAS Offering

4. Value & Benefits


6. Why SAS?


CUSTOMER STORY P & V (BELGIUM)

Customer Quote

Choosing SAS enabled us to convert our dispersed data into consistent and ready-to-use information, available for the implementation of Solvency II, as well as for improving our risk management framework

Raffaele Barbera, Chief Risk Offocer

Business Problem

• Implementing Solvency II Directive

• Embedding risk assessment into daily activities

Results

• Improves P&V Group's decision-making and efficiency

• Meets its statutory obligations under Solvency II.

• Improved risk management through automatically

generated reports (dashboards, KRIs/KPIs, etc.)

Solution

• SAS Risk Management for Insurance


CUSTOMER STORY UNIPOL (ITALY)

Customer Quote

It is … operational, management-based and executive all at the same time, because it allows for one business activity to be compared with another in terms of risk exposure, resource consumption and overall profitability

Renzo Avesani. Director Risk Management

Business Problem

• Transform Solvency II compliance into strategy

Results

• Production factors optimized

• Capital management aligned with business performance

Solution



CUSTOMER STORY ECCLESIASTICAL (UK)

Customer Quote

We have a solution that will not only assist with our compliance of the Solvency II directive, but also one that puts us at the forefront of the industry

Nigel Light. Business Intelligence Analyst

Business Problem

• Meet rigorous data requirements of Solvency II

Results

• Reduced costs

• Improved decisions

• Established data governance processes

Solution

• SAS® DataFlux® Data Management Platform


CUSTOMER STORY HDI ASSICURAZIONI (ITALY)

Customer Quote

We have met the double objective of improving data quality and streamlining information processes

Francesco Massari, Head of Organization and Information Systems

Business Problem

• Meet Solvency II requirements while improving data

quality and decision-making speed

Results

• Improve data quality

• Timely information reaches business users, actuarial

scientists and senior management

Solution



AGENDA



3. SAS Offering

4. Value & Benefits


6. Why SAS?


WHY SAS? PROVEN RISK MANAGEMENT SOLUTIONS

Integrated Enterprise Risk Management (ERM) risk solution for insurers

Remove current variety of point risk solutions

Reduce Spreadsheet risk through improved integration

Enables standardization across risk infrastructure

Adapts to individual customer requirements by configuration of the SAS

technology

Provides capabilities to support changing requirements to meet future needs

SAS investing in new developments in technology and solutions for Risk

Reliability, Cost and Project efficiency, Flexibility


WHY SAS? PROVEN END-TO-END SOLUTIONS

Fully integrated Solvency II data

management platform

Insurance data model with

Solvency II pre-built data marts

In-built data quality routines to

ensure maximum value to the

business

Insurance data model implemented

and used by clients to support an

Enterprise data warehouse.

Supports integration with existing

financial models

Creation and inquiry of automatic

audit control, data lineage and

reverse impact analysis

Quantitative and Qualitative

Risk Management.

Own Risk and Solvency

Assessment (ORSA)

Capital calculation risk engine • Solvency II standard model approach

• Individual risk internal model calculation,

i.e. market risk.

• Risk aggregation, also using results from

other existing models

Workflow engine ensuring gover-

nance business process mgmt.

Integrated data model creating

risk based capital information in a

controlled and auditable way used

in business decision making

Flexible reporting capabilities at

Group, Division and Product level.

Pre-built reporting repository

Dashboard capabilities to publish

Key Risk Indicators (KRIs) to

web, Excel, Word, PowerPoint or

Outlook.

European regulatory reports

available, customizable to local

requirements.

SAS Data Management SAS Risk Analytics SAS Reporting

Proven and reliable technology


WHY SAS? CONCLUSIONS

Comply with Solvency II requirements using an integrated Risk Management

system

Reduce cost and effort with SAS Risk Reporting Repository model and

preconfigured reports

De-risk the project with SAS proven technology and establish consistent

internal reporting standards and process automation

Accelerate implementation process with a fully fledged risk management

framework in place

Quality Assurance of the data used by all business functions for decision

making process.

The sophistication of the SAS solutions ensures that this company can move

‘beyond Solvency II’


MORE

INFORMATION

• Contact information:

Stuart Rose, SAS Global Insurance Marketing Director

e-mail: [email protected]

Blog: Analytic Insurer

Twitter: @stuartdrose

• White Papers:

Accelerating Solvency II Compliance

Data Management and Solvency II

mailto:[email protected]

http://bit.ly/gvrdAy

http://bit.ly/14wusE3

http://bit.ly/Xk1927

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