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Executive's Guide to Solvency II

ISBN: 978-0-470-92570-6
208 pages
September 2010
Executive
A straightforward guide to the evolution, benefits, and implementation of Solvency II

Providing a guide to the evolution, practice, benefits, and implementation of Solvency II, Executive′s Guide to Solvency II deftly covers this major European regulation which ensures that insurers can meet their risk–based liabilities over a one–year period to a 99.5% certainty. Part of the Wiley and SAS Business series, this book will guide you through Solvency II, especially if you need to understand the subtleties of Solvency II and risk–based capital in basic business language. Among the topics covered in this essential book are:

  • Background to Solvency II
  • Learning from the Basel Approach
  • The Economic Balance Sheet
  • Internal Models
  • People, Process, and Technology
  • Business Benefits of Solvency II

Executive′s Guide to Solvency II  has as its aim an explanation for executives, practitioners, consultants, and others interested in the Solvency II process and the implications thereof, to understand how and why the directive originated, what its goals are, and what some of the complexities are. There is an emphasis on what in practice should be leveraged upon to achieve implementation, specifically data, processes, and systems, as well as recognition of the close alignment demanded between actuaries, the risk department, IT, and the business itself.

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Preface.

Acknowledgments.

Chapter 1: The Evolution of Insurance.

Risk Perception.

Early Risk Instruments.

Role of Insurance in Economic Growth and Prosperity.

Conclusion.

Chapter 2: Insurers' Risks.

Insurable and Uninsurable Events.

Risk Taxonomy.

Underwriting Risk.

Market Risk.

Credit Risk.

Operational Risk.

Liquidity Risk.

Risk Transfer and Mitigation.

Conclusion.

Chapter 3: Solvency II Chronology.

Need for Insurance Regulations.

Why Do Insurers Fail?

Causes of Failure.

Initial Solvency Directives.

Process of the Solvency II Project.

Conclusion.

Chapter 4: Learning from the Basel Approach.

Regulation in Context of the Credit Crisis.

Evolution of Banking Regulation.

Application to Solvency II: Regulation.

Application to Solvency II: Business Logic.

Lessons from the Credit Crisis.

Conclusion.

Chapter 5: The Solvency II Directive in Brief.

What Is Solvency II?

Solvency II Is Principles Based.

Partial and Internal Models.

Economic Capital.

The Economic Balance Sheet.

Structure of the Directive.

Conclusion.

Chapter 6: The Economic Balance Sheet.

Total Balance Sheet Approach.

Quantitative Stipulations of the Level 1 Text.

The Standard Formula.

Non-Life Underwriting Risk Module.

Market Risk Module.

Default Risk Module.

Conclusion.

Chapter 7: Internal Models.

Complexity of Implementation.

Definition and Scope of Internal Models.

Internal Models Application.

Tests and Standards.

Conclusion.

Chapter 8: People, Process, and Products.

Key to a Successful Solvency II Project.

People.

Process.

Technology.

Data Management.

Risk Analysis.

Reporting.

Conclusion.

Chapter 9: Business Benefits.

Regulation Past and Present.

Benefits of an Enterprise Data Management Framework.

Benefits of an Economic Balance Sheet.

Benefits in Perspective.

Benefits beyond Solvency II.

Conclusion.

Notes.

Glossary.

Selected References.

About the Authors.

Index.

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David Buckham is the founder and president of Monocle Solutions, an international risk assessment and optimization company that provides various products and consulting services by way of intellectual property.

Jason Wahl is head of research at Monocle Solutions. His areas of interest include regulation of financial institutions and financial stability.

Stuart Rose is Global Insurance Marketing Manager at SAS Institute, a market-leading business intelligence and analytics software vendor. He has worked for a variety of software vendors where he was responsible for marketing, product management, and application development.

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