Solvency II
Solvency II: focus on quantitative risk management
As insurers respond to renewed opportunities, they face the complex challenge to implement the Solvency II directive. This regulation must be implemented January 2013. It is a new set of regulatory requirements for insurers that operate in the European Union. It demands that a business wide risk management system be embedded throughout the entire organization to manage all risks related to the business processes of insurers to protect investments and secure financial obligations, ultimately based on secure funding. Risks are measured on consistent principles, and quantified through capital requirements calculations. The real paradigm shift is in Pillar 2 of Solvency II (called ORSA). Insurers must exhibit and prove to regulators how they identify, assess, and for the first time, monitor and manage the quality of their overall risk management.
Required: Quantitative Risk Management
The best practice for insurers, as they strive for Solvency II compliance is to embed qualitative and quantitative risk management throughout their organization. A process-based risk program is the best foundation for risk management programs including market, credit, liquidity and operational risks. Developing such a program is a time consuming project, because involvement of the entire business is required and the framework must be developed in concert with a still evolving regulatory requirement. To be prepared it is imperative that insurance companies begin developing qualitative and quantitative process-based risk management approaches and integrate this with their quantitative systems.
Best practice approach to Solvency II compliance
Trusted by hundreds of customers worldwide, BWise delivers Governance, Risk and Compliance (GRC) and Enterprise Risk Management (ERM) solutions to insurance firms. Based on a developed Solvency II methodology BWise has successfully partnered with insurance firms to implement risk-based solutions for Solvency. The ORSA portion of Solvency II describes in broad terms how an insurer’s risk framework must be structured and what initiatives should be embedded for the governance and control of these risks. Each insurance company has its own business processes, procedures and organizational structure, which create unique risks. Organizations must build their own risk management framework to comply with Solvency II.
Added value for all users
Building this system, as required by Solvency II, demands a change in work processes, a risk-based awareness and approach to the business, especially to the processes of each department in the organization. Key to a successful Solvency implementation is the acceptance by users of this new way of working. A process-based approach to Solvency II is the best and most effective way to bring risk management to an operational level and to an enterprise’s users.
Please click here for more information on the BWise Solvency II Template.
