Our focus on Solvency II
The far-reaching implications of Solvency II mean changes for clients and the industry. Swiss Re’s Solvency II project leader Susanne Kaske-Taft talks us through how Swiss Re has prepared.
What has been Swiss Re’s focus in preparing for Solvency II?
We are working hard to be well prepared for the introduction in 2012. But we do not see Solvency II as a one-off “big bang” event. With Solvency II we now see the explicit match between industry regulation and the economic view of capital, so that they become almost identical. We are looking very specifically at how the directive will impact our clients’ daily business and engaging in a dialogue on the consequences of these changes.
Will Solvency II influence the reinsurance product portfolio as well?
Yes, of course. We have done an assessment of our own products under Solvency II and seen how the solvency effects will change under the new regulation and how they could be considered in the different models. Given the change in solvency effects of different products, clients will need to assess their current reinsurance programmes under the Solvency II regime and restructure, if necessary, to make them more efficient and better value for money.
In concrete terms, what will implementing Solvency II entail?
To make good decisions about how to implement Solvency II we believe a lot of important issues are buried in the detail. For example, Solvency II requires insurers to apply economic principles for calculating their required and available regulatory capital using an internal model, a partial internal model or the Standard Formula. In our latest Focus report we show that for non-proportional reinsurance, the Standard Formula approach struggles to support an economic perspective and therefore offer appropriate capital relief.
What does that mean for clients?
If our clients want to use the Standard Formula, they need to ask themselves whether it will give an accurate enough picture of their risk capital requirement. In our latest Focus report, we have shown that the underwriting solvency capital requirements could be over- or understated by the Standard Formula. Certainly with the current version of the Standard Formula, partial or full internal models would be more accurate. This is why we have made some suggestions as to how the Standard Formula could be improved.
"We are looking very specifically at how the directive will impact our clients’ daily business and engaging in a dialogue on the consequences of these changes"
Susanne Kaske, Head of Solvency II Project, Swiss Re
Related Links
Insurance Risk Management Response to the Financial Crisis (CRO Forum Paper, April 2009)
Guest Commentary by Raj Singh, Chief Risk Officer, Swiss Re, in Handelsblatt, 30 March 2009
Insurance View: Regulatory Consequences of Financial Crisis (PEIF - Pan European Insurance Forum Paper, Dec. 2008)
"Solvency II macht die europäische Versicherungsindustrie fit für den globalen Markt" von Christian Mumenthaler, Zeitschrift für Versicherungswesen 21/2007
External links
European Commission Solvency II pages
CEA - Comité Européen d'Assurances
CEIOPS - Committee of European Insurance and Occupational Pensions Supervisors
