15 February 2015

Solvency II introduction (rules for Insurance Industry)

Several layers of hurdles, seem to be aimed at encouraging organisations to become increasingly self-monitoring (recording how they are testing themselves rather than just results):

Standard formula
Easiest to calculate but probably sets the highest bar

Undertaking Specific Parameters (USPs)
Organisation works out their own version of some of the numbers to replace assumptions in the standard formula.  Requires more work and significant justification to back up the changed numbers.  Likely to reduce the threshold.

Partial Internal Model
The organisation replaces parts of the model and records the justification of having done so.

Full Internal Model
The organisation replaces the whole model and records justification for having done so.

Split into 3 (or 4) 'pillars':

Pillar 1
Solvency requirement

Pillar 2
Risk Documentation

Pillar 3
Reporting

Pillar 4  (in some organisations, or may be included among the other three pillars)
Data Maintenance and Control

Abbreviations

ETL: Extract Transform Load
QRT: Quantitative Reporting Template

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