Solvency II will avoid

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Since the European directive was first implemented, the way insurers design their products and assess financial capacity is changing. The insurance risks that Solvency II will prevent will improve protection for policyholders across Europe. To achieve this, companies in the sector must commit to: Assess risks as never before. Find out why resources are lost. Be able to quantify these unexpected events based on statistical techniques. Cultural change, investment in learning, structural adjustments and the creation of new internal models are the starting point. 2016 is the day when plans and designs must become reality and the beginning of a new era for European insurance and reinsurance companies. Insurance Risk Image source: " Man On Uncertainty Canadian Hospitals Email List Coin Shape " by pakorn Sovencia II What insurance risks will he avoid? Considerable progress has been made since capital levels were set based on the assumed risks established under Solvency I. In terms of capital requirements, the directive aims to: Enhance confidence in the insurance industry. Maximize the stability of insurance and reinsurance companies.



Establish an optimized monitoring system to ensure timely notification when available capital falls short of minimum requirements. In this way, it aims to achieve: Reduce the risk of unpaid claims. Minimize losses to insureds caused by company bankruptcy. As the Institute of Insurance Research puts it in one of its studies, companies in this sector need to have sufficient capital to absorb losses that may arise from their operations . It is an understanding of the function of capital as a shock absorber whose raison d'être is: permanence in time. Loss of absorptive capacity. There are no obligations (whether in the form of dividends, fixed interest or any other obligations). Prudence and consistency are the mottos that guide the way insurance companies operate, because only in this way can the insurance risks that Solvency II will avoid can be prevented and mitigated . New call to action Insurance risks that Solvency II will avoid and insurance risks that Solvency I will not prevent Solvency I introduces less complexity when implemented than the current Directive. Lower investment and simpler applications come from less elaborate requirements on their own resources, governance, and advertising. However, its effectiveness is very limited.



Specifically , some of its weaknesses are: Lack of valuing assets and liabilities based on market realities . The horizon of risk assessment is reduced and the focus is on technical aspects, leaving key variables out of control. The incidence of reinsurance is unstable. There is a lack of quality in the process. All of these factors translate into insurance risks, which Solvency II will avoid while also providing the industry with a new environment that guarantees: capital allocation efficiency. Higher risk management quality. Strengthen policyholder protection. Greater freedom in choosing your risk profile. Improve competition among local companies. To this end, its provisions are structured around three pillars aimed at establishing requirements for minimum capital, solvency and investment rules applicable to all companies in the sector; internal controls and risk management; and oversight and transparency. The combination of quantitative and qualitative requirements protects the interests of insureds and enhances the stability of companies in the sector, who in turn must change the way they understand, operate and govern insurance and reinsurance. They must Be subject to regular assessments and audits and accept the regulatory requirements imposed on them by Solvency II .