Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Moody's - Climate Risk Insurers series
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • The Actuary Issues
  • September 2014
09

Life insurers urged to speed up Solvency II compliance

Open-access content Thursday 25th September 2014 — updated 3.54pm, Monday 4th May 2020

Life insurers should accelerate current processes used in managing compliance as the upcoming European Solvency II deadline draws nearer, Towers Watson has urged.

The UK actuarial firm today published a survey highlighting the time pressures that life insurers will be under to meet the Solvency II reporting timelines, which is due to come into force in January 2016.

The survey said the leading risk and capital modelling issues preoccupying UK life insurers are: model validation requirement, the application of the matching adjustment (MA) or volatility adjustment (VA), and accounting for credit and longevity risks.

Towers Watson found in its poll of 20 UK-based life companies, representing the vast majority of life firms using internal models for the new capital rules that over two-thirds expect to completely re-engineer their end-to-end reporting processes.

A majority said they expect to increase investment automation and supporting technology, while nearly half expect to make greater use of advanced capital modelling techniques such as Least-squares Monte Carlo methods - a standard numerical method for option pricing.

The survey also acknowledged that progress had been made in validating models but most firms still had 'further to go'. It noted that attention had switched over the last year to broader model validation requirements.

These include the degree of usability of the internal model for the business, the need to demonstrate independent and robust challenge, and determining the right level of reporting detail for the board.

Of those polled, three quarters said they intend to use a MA (60%) or VA (15%) when valuing their annuity businesses.

Towers Watson senior consultant Tim Wilkins said: 'Trial MA submissions to the PRA [Prudential Regulation Authority] have provided an early indication of the level of detail involved.

'We expect there to be pre-application processes for both VA and MA, and both are likely to be restricted in scope and require careful justification.  This creates considerable uncertainty and firms should keep abreast of developments.'

Paul Bowker, a mortality expert at Towers Watson, noted that whilst many firms have made good progress with the run-off approach for longevity risk, other firms are seeking a one year Value at Risk (VaR) approach and, in some cases, are having difficulty achieving credible outcome.

He said: 'A key challenge under the one year VaR approach is to develop a method that appropriately captures all of the risks that may occur over a one year time horizon.'

This article appeared in our September 2014 issue of The Actuary.
Click here to view this issue
Filed in
09
Topics
Regulation Standards

You might also like...

Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

New Fast-Growing Team - Actuarial Systems Development

London (Greater)
Excellent Salary Package
Reference
143762

Actuarial Pension Consultant – Scotland/Remote – Up to £90,000 plus bonus

Edinburgh / Glasgow / Remote working
Up to £90,000 + Bonus
Reference
143761

Part Qualified Pensions Actuary– Specialised Pensions Consultancy - Scotland/Remote - Up to £70,000

Edinburgh / Glasgow / Remote working
Up to £70,000 + Bonus
Reference
143760
See all jobs »
 
 

Today's top reads

 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2023 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ