Under Solvency II, insurers and reinsurers must comprehensively assess their risk exposure, set up their governance system in line with risk and report to the supervisory authority and the public. Since 2014, insurers have been subject to preparatory measures in selected core topics, and Solvency II will come into full force in 2016.
KPMG has a wealth of experience in Solvency II implementation with various insurance groups. With KPMG, Solvency II is not just a matter of fulfilling obligations: In our projects, the focus is not only on a profound understanding of regulatory requirements, but also on efficient implementation that is appropriate for the business entity.
We would be pleased to present a selection of our KPMG solutions in the area of Solvency II. These have proven themselves in various projects to successfully implement Solvency II and to increase efficiency and performance in existing processes. They concern the areas of:
- Strategy & control
- Modelling & investment management
- Governance & ORSA
- Reporting & Fast Close
- Change management & training
Dr. Frederik Boetius
Partner Financial Services
KPMG AG Wirtschaftsprüfungsgesellschaft
A selection of our solutions:
- Strategy & governance - capital management and coverage ratio: The coverage ratio is the key control variable under Solvency II. If there are not enough own funds to cover the capital requirement, the supervisory authority can take measures, which could include the withdrawal of the business licence. In the event of a tense solvency situation, options for action must be examined within the framework of risk and capital management.
- Our approach: Analysis of capital requirements and eligible own funds; identification and evaluation of measures to improve coverage ratio; support for implementation
- Our reference: Analysis of model invoices and setup of capital management measures for multiple mandates
- Modelling - Life and health prophet modelling: In the market environment of low interest rates and cost pressure, business entities need reliable statements regarding the economic impact of strategic decisions. Reliable data from holistic business models are indispensable for corporate management.
- Our approach: Analysis of models and assumptions; identification and implementation of model optimisation and process automation; independent validation of economic metrics in the KPMG benchmark model
- Our reference: Optimisation and expansion of economic models; independent validation of economic key figures and business plans in strategic projects
- Modelling - Damage/Accident: Even for composite insurers, low interest rates are calling profitability into question and thus creating new challenges. Business entities need reliable forecasts for strategic decisions – in HGB, IFRS and Solvency II. Integrated models support corporate governance.
- Our methodology: Analysis of reserve processes, data availability and actuarial models; identification and implementation of optimisation opportunities
- Our results: Efficient actuarial processes and validated models; consistent business figures in all balance sheet views
- Investment management: The abolition of the Investment Regulation, ORSA requirements and the low interest rate environment are shifting the ongoing monitoring of earnings and risk-bearing capacity even more into the focus of corporate management – with new challenges for investment controlling.
- Our methodology: Comprehensive control tool for ongoing limit monitoring and a priori estimates of the impact of investment decisions on SCR and other control variables in medium-term planning; studies on strategic asset allocation and new product processes
- Our reference: Workshops and implementation project on the repeal of the Investment Regulation at various insurance companies
- Governance - Actuarial Function: The actuarial function must be established by 1 January 2016. It coordinates and validates the calculation of actuarial provisions within the group, assesses data quality and issues an opinion on underwriting and acceptance policies and reinsurance arrangements.
- Our methodology: Analysis of the organisational setup; development of guidelines and reports based on KPMG templates; quality assurance support for analyses and validation
- Our reference: Advising on the establishment, implementation and reporting of the actuarial function with various insurance companies
- Own risk and solvency assessment (ORSA) - Balance sheet projection: As part of the company’s own risk and solvency assessment, a projection of risk capital and own funds over the business entity’s planning horizon is required. Various models are conceivable for this purpose, ranging from the preparation of a detailed planned balance sheet to the projection of aggregated key figures based on risk drivers.
- Our methodology: Analysis of existing key planning figures and risk drivers; development of a methodology for projection and consideration of projected values under stress scenarios
- Our reference: Design and establishment of balance sheet projections and risk driver approaches, incl. stress scenarios for several companies
- Integrated reporting: Solvency II establishes comprehensive requirements for qualitative and quantitative reporting to supervisory authorities and the public. Reporting is carried out within tight deadlines on an annual and quarterly basis. When integrating Solvency II into corporate management, many business entities face the challenge of harmonising internal and external reporting.
- Our methodology: Analysis of existing reporting; development of a holistic reporting approach taking into account responsibilities and processes
- Our reference: Conception and establishment of integrated reporting as well as preparation of individual reports under Solvency II at various insurance companies
- Fast close: Solvency II also changes the reporting deadlines for non-capital-market-oriented insurance groups. Shorter closing times, the linking of HGB and Solvency II reports and the inclusion of financial and planning deadlines in an overall schedule with adapted processes pose challenges for companies.
- Our methodology: Analysis of existing processes and schedules; identification of adaptation opportunities or reduction of manual processes; proposals for equalisation of peak capacities; consideration of estimation and new processes
- Our reference: Acceleration of the closing processes and adjustment of the corporate calendars for several insurance groups
- Change management & training: The responsibility for board of management members, supervisory board members and persons with key functions is expanded with Solvency II. These persons must meet professional qualification and personal reliability requirements. A comprehensive training of employees can help to create acceptance for Solvency II and to consolidate processes.
- Our methodology: Needs-based training of board of management members, supervisory board members, key functions and technical staff; creation of certificates; training based on a train-the-trainer concept
- Our reference: Board of management and supervisory board training at more than 15 business entities, technical training in all areas affected by Solvency II