Solvency II

A review of the challenges Solvency II aims to address: namely the key areas of heightened risk faced by different types of insurer. Signs of distress: Common themes in troubled insurance companies: growth, over-concentration in volatile markets, asset and liability mismatches, excessive investment risk. The key differences between Solvency II and other regulatory regimes and an appreciation of how eligible capital and technical provisions are to be determined relative to the risks borne. Pillar 1 Risk Modules: Reviews common analytical measures used for key business risks of insurer and relates these risks to the risk charges as calculated under the standardised approach for the SCR. Pillars 2 and 3: Explains how the key elements of Pillars 2 and 3 of Solvency II are intended to improve corporate governance and internal risk management in insurance companies, and how group supervision is intended to combat contagion risk. Impact of Solvency II: Pillar 3 disclosures and impact of Transitional Measures and Equivalence on SCR coverage ratios, Relevance of SII metrics in ratings process