C - IFOA (Solvency II)

Question 1

IFOA SOLVENCY II

ENID : Acronym definition

Usual Definition of ENID

Proposed Definition of ENID

Answer 1

• Events not in Data
• High-Severity, low-probability events
• The BALANCING AMOUNT required to bring the best estimate before ENID up to an amount allowing for all possible future outcomes

Question 2

IFOA SOLVENCY II

Describe how can ENID be identified

Answer 2

• Bring together parties who understand the insurer’s exposure (Underwriters, Claims managers, Reserving and pricing actuaries, reinsurance managers) to brainstorm of possible future events that could affect the future CFs.
• Their discussion should include factors affecting:
  
  • Future settlement of past events
  • Potential future claims relating to current exposures
• SPECIFIC events to consider may include
  
  • CATs, court awards, legislative changes, potential large one-off claims

Question 3

IFOA SOLVENCY II

ENID loading does not necessarily have to be a positive loead, it could allow for both positive and negative future outcomes not already allowed for. Provide examples of positive outcomes

Answer 3

• Lower claims experience due to successful implementation of a new claim process
• Court award in insurer’s favor
• Change in legislation in insurer’s favor

Question 4

IFOA SOLVENCY II

Why might it be beneficial for insurers to attempt to identify ENID?

Answer 4

1. May increase awareness of potential risks by senior management
2. May assist in calculation of loading using frequency/severity methods
3. May increase regulator confidence in company’s risk management due to insights gleaned