IFA.Solvency2

Question 1

What does the acronym ENID stand for in the context of Solvency 2?

Answer 1

Events Not In Data

Question 2

What is the ‘usual’ definition of ENID?

Answer 2

High-severity, low-probability events (often not in historical data)

Question 3

What is the ‘proposed’ definition of ENID (sometimes called the ‘purpose’ of ENID)?

Answer 3

BALANCING AMOUNT required to bring the best estimate before ENID up to an amount allowing for all possible future outcomes

Question 4

Describe how ENID can be identified

Answer 4

Bring together parties who understand the insurer’s exposure.

Their discussion should include factors affecting:

• future settlements of past events
• potential future claims relating to current exposures

SPECIFIC events to consider may include:
- catastrophes, court awards, legislative changes

Question 5

Identify an example of ENID with an unfavourable outcome

Answer 5

1. Catastrophic event in an area where the insurer has material exposure
2. Court ruling against the insurer

Question 6

Identify an example of ENID with a favourable outcome.

Answer 6

1. Withdrawal from market of a major competitor

2. Court ruling for the insurer

Question 7

Identify 3 reasons why might it be beneficial for insurers to attempt to identify ENIDs

Answer 7

1. Increase awareness of potential risks by senior management
2. Assist in calculation of loading using freq/sev methods
3. Increase regulator confidence in company’s risk management