chapter 10 Flashcards
to what uses can an internal model be put other than assisting with calculating capital requirements
pricing
reinsurance purchasing
investment selection
dividend decisions
what statements would you expect to find in the risk appetite statement of an insurance company
statement of acceptable risks
probability of failure that is deemed to be acceptable
maximum loss from any one incident
target level of financial security
quality and diversity of investments
what would the risk appetite statement of an insurance company be used for
set risk acceptance criteria
investment policy
reinsurance policy
what is scr
solvency capital requirement
quantity of capital that is intended to provide protection against unexpected losses over the following year
what is mcr
minimum capital requirement
level below which policyholders are exposed to an unacceptable level of risk
85% probability of adequacy over the following year
what is an orsa
own risk and solvency assessment
helps firms to understand and manage the risks that they are exposed to
what is an sfcr
solvency and financial condition report
needs to be done annually (solvency ii requirement)
what does the solvency ii directive state about the actuarial function and insurance firms
requires that all insurance firms have an actuarial function
must contribute to the effective implementation of the risk management system
solvency ii pillar 1
financial requirements
solvency ii pillar 2
governance and supervision
solvency ii pillar 3
reporting and disclosure
financial requirements
calculation of mcr and scr
governance and supervision
own risk and solvency assessment (orsa)
solvency ii tier 1 capital
common equity and retained earnings, highest quality of capital and must be able to absorb losses on a day-to-day ‘going concern’ basis
solvency ii tier 2 capital
e.g. subordinated debt, lower quality and only needs to absorb losses on insolvency
