the impact of solvency ii türda Özmen director the 2nd international insurance conference...
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![Page 1: The Impact of Solvency II Türda Özmen Director The 2nd International Insurance Conference Istanbul, 30 September 2010](https://reader034.vdocuments.site/reader034/viewer/2022051516/56649e435503460f94b35f9a/html5/thumbnails/1.jpg)
The Impact of Solvency II
Türda ÖzmenDirector
The 2nd International Insurance Conference Istanbul, 30 September 2010
![Page 2: The Impact of Solvency II Türda Özmen Director The 2nd International Insurance Conference Istanbul, 30 September 2010](https://reader034.vdocuments.site/reader034/viewer/2022051516/56649e435503460f94b35f9a/html5/thumbnails/2.jpg)
Agenda
The Road Ahead
Where are Capital Ratios Headed under Solvency II?
Impact on the Insurance Industry
Implications for Ratings
![Page 3: The Impact of Solvency II Türda Özmen Director The 2nd International Insurance Conference Istanbul, 30 September 2010](https://reader034.vdocuments.site/reader034/viewer/2022051516/56649e435503460f94b35f9a/html5/thumbnails/3.jpg)
Agenda
The Road Ahead
Where are Capital Ratios Headed under Solvency II?
Impact on the Insurance Industry
Implications for Ratings
![Page 4: The Impact of Solvency II Türda Özmen Director The 2nd International Insurance Conference Istanbul, 30 September 2010](https://reader034.vdocuments.site/reader034/viewer/2022051516/56649e435503460f94b35f9a/html5/thumbnails/4.jpg)
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Road Ahead
1 July 2010
Final QIS5 Specifications
31 Dec 2012
Solvency 2 in Force?
2010
April 2011
QIS5 Results
2011 2012
End 2010
Draft Level 2 Implementing Measures
Aug–Nov 2010
QIS5 to Run
Jun–Oct 2012
Final Level 2 Implementing Measures Adopted
2013
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Agenda
The Road Ahead
Where are Capital Ratios Headed under Solvency II?
Impact on the Insurance Industry
Implications for Ratings
![Page 6: The Impact of Solvency II Türda Özmen Director The 2nd International Insurance Conference Istanbul, 30 September 2010](https://reader034.vdocuments.site/reader034/viewer/2022051516/56649e435503460f94b35f9a/html5/thumbnails/6.jpg)
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0%
100%
200%
300%
400%
Captive Reinsurance Non-life Composite Life
(Solvency ratio) Solvency I QIS 4
QIS 4 Results – Refresher
Source: CEIOPS
Comparison of Solvency Ratios, All QIS4 Participants
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UK Life Solvency Ratio
Source: Milliman
Breakdown from QIS 4 to Estimated QIS 5 (Draft Specifications)
100%
110%
120%
130%
140%
150%
160%
QIS 4 YE 07QIS 4 YE 08 IlliquidityPremium
Market SCRMktCorrelations
SCR Other QIS 5 DraftYE 08
(Solvency ratio)
Calculated for a Notional Life Company Representing Market
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0%
100%
200%
300%
400%
500%
600%
France Ireland Italy UK Poland Romania Slovakia
(Solvency ratio) QIS 4 YE 07 QIS 4 YE 08 QIS 5 YE 08 Draft
EU Life Solvency Ratios
Source: Milliman, Autorité de Contrôle Prudentiel
For a Notional Life Company Representing Whole Market
Calculated for a Notional Life Company Representing Market
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0%
5%
10%
15%
20%
25%
30%
Le
ga
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xpe
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s
Ass
ista
nce
Mo
tor
TP
L
Mo
tor
Oth
er
Pro
pe
rty
TP
L
MA
T
Cre
dit
an
dS
ure
tysh
ip
QIS 4 Final Advice QIS 5 Draft
Non-Life Underwriting Parameters
Source: CEIOPS, EC
Premium Risk Standard Deviations
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Internal Models – The Vision
> Alternative to the standard formula
> Tailored to business specifics
> Calibrated to 99.5% VaR over 1 year
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Internal Models – The Reality
Given that each insurer writes different business, has a different risk profile, a different corporate structure, different operational processes and a different risk management framework, each internal model will be different and used in a different way. (FSA DP 08/4)
Photo Source: US Army
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Outstanding Issues
> Grandfathering
> Equivalence
> (Relative) level of some standard capital charges
> Tax
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Agenda
The Road Ahead
Where are Capital Ratios Headed under Solvency II?
Impact on the Insurance Industry
Implications for Ratings
![Page 14: The Impact of Solvency II Türda Özmen Director The 2nd International Insurance Conference Istanbul, 30 September 2010](https://reader034.vdocuments.site/reader034/viewer/2022051516/56649e435503460f94b35f9a/html5/thumbnails/14.jpg)
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Impact on the Insurance Industry
> Shift from capital-intensive to capital-lite products
> Pricing for increased cost of capital
> Asset reallocation
> Increased de-risking
> Industry consolidation
> Implementation costs
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Agenda
The Road Ahead
Where are Capital Ratios Headed under Solvency II?
Impact on the Insurance Industry
Implications for Ratings
![Page 16: The Impact of Solvency II Türda Özmen Director The 2nd International Insurance Conference Istanbul, 30 September 2010](https://reader034.vdocuments.site/reader034/viewer/2022051516/56649e435503460f94b35f9a/html5/thumbnails/16.jpg)
Implications for Ratings
Capital Req.s
Up Means
Leverage Down
Increased
Barriers to Entry
Improved Risk-Based
Assess- ment
Transparency and
Comparability Up?
Short-Term
Implem- entation
Risk
Technical Issues: Coupon Deferrals
Threats to Some Product Lines
Transparency and
Comparability Down?
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