There are a number of areas of International Financial Reporting Standard (IFRS) 17 where the International Accounting Standards Board has allowed firms to make choices on their approaches. This paper by Milliman consultants focuses on the approaches available under IFRS 17 for the derivation of the discount rates for use in the various calculations required by the Standard.
The assessment of the appropriateness of the standard formula is a key part of the Own Risk and Solvency Assessment (ORSA) process under Solvency II. As part of this assessment, (re)insurers must identify any material deviations in risk profile compared with the assumptions underlying the standard formula. This briefing note by Milliman’s Andrew Kay and Sinéad Clarke outlines what is expected under this assessment, including the key challenges such as the treatment of risks that are not reflected in the standard formula, the qualitative assessment, and what is required if a material deviation is identified.
Under the Central Bank of Ireland’s Guidelines on Preparing for Solvency II, all insurance and reinsurance undertakings are required to prepare a Forward-Looking Assessment of Own Risks (FLAOR) in 2014 and 2015. Those companies rated as high or medium-high impact under the Central Bank’s Probability Risk and and Impact SysteM (PRISM) rating system, which are not in either the preapplication or application process for an internal model, are required from 2015 onward to perform an assessment of whether their risk profiles significantly deviate from the assumptions underlying the standard formula Solvency Capital Requirement (SCR). This requirement will apply to all companies from 2016 onward.
Milliman’s Andrew Kay and I conducted a survey analysis of 27 companies in Ireland to gain perspective on the appropriateness of the standard formula for the risk profile of these companies in their 2015 FLAORs. To read the entire analysis, click here.
Milliman developed the Solvency II Readiness Assessment Tool to help companies prepare and plan for Solvency II. The tool is designed for life and nonlife direct writing and reinsurance companies. It enables companies to rate themselves using a range of detailed questions covering the full scope of Solvency II. A score of 5 identifies areas that are 100% ready, whereas a score of 1 identifies areas where no progress has been made.
Thirteen life companies based in Ireland shared their current levels of preparedness. In this briefing, Milliman’s Andrew Kay and Mike Claffey have consolidated the results to give an overall idea of the issues facing companies.