On 18 August the Central Bank of Ireland (CBI) published consolidated insurance statistics based on firms’ year-end 2016 positions. This is the first such publication since the introduction of Solvency II and this format will be used for publications in each future year as part of efforts to harmonise disclosure across Europe. This publication replaces the ‘Central Bank Insurance Statistics’ produced in previous years (based on the returns submitted to the CBI under the old solvency regime), more commonly known as the ‘Blue Book.’
Industry balance sheet
The statistics are at an aggregate level only, covering 196 companies based in Ireland (a mix of life and non-life firms, both direct writers and reinsurers) with assets valued at almost €347 billion. It is interesting to note that, while two new authorisations were granted during 2016, 15 authorisations were withdrawn.
The total Own Funds of the Irish industry are just in excess of €39.0 billion. They cover a Solvency Capital Requirement (SCR) of almost €22.7 billion. The resulting solvency cover for the industry is 172%. In comparison the European industry as a whole had coverage of 210% at the end of June 2016.
Of the SCR of €22.7 billion almost two-thirds is calculated using the standard formula. Nine companies use full internal models and another three use partial internal models to calculate the SCR, with these 12 firms accounting for 36% of the total SCR at an industry level. In addition to the calculated SCR, one firm has had a capital add-on imposed by the CBI, totalling almost €94 million at year-end 2016. The CBI does not disclose the name of the company with the capital add-on in this publication.
Applications to the CBI
The statistics also outline various approvals granted by the CBI during 2016. Of the three firms which applied to use the volatility adjustment, only two received approval, adding to the total number of seven firms using the volatility adjustment at year-end 2016. Only one firm submitted an internal model application during the year, which appears to have been unsuccessful. This could suggest that some firms were inadequately prepared when submitting applications to the CBI.
As at year-end 2016 no firms were using the matching adjustment and only one firm was applying the transitional measure on risk-free interest rates. No further submissions for these measures were received during 2016. This could indicate that the long-term guarantee measures are not considered to be very attractive to Irish companies—either in terms of the effort involved in obtaining approval or the benefit gained.
While the data contains a number of interesting figures, it is the absence of company-specific data that is most noteworthy. The Blue Book previously outlined assets, liabilities and premium volumes at a company level. The new format report does not include any premium data and only provides statistics at an industry level. Of course all this information is publicly available in individual companies’ Solvency and Financial Condition Reports, but requires some time to analyse.
Full details of the year-end 2016 statistics published by the CBI can be found here. Additional Milliman analysis of the year-end 2016 position of the Irish industry can also be found here.