Summary - Regulation

Question 1

SOLVENCY II
Scope

Answer 1

Applies to European insurers and reinsurers (except very small ones). A risk-based capital regime focusing on solvency, governance, and disclosure.

Question 2

SOLVENCY II
Key features

Answer 2

“QGD” = Quantitative, Governance, Disclosure

Three Pillars:
- Pillar 1: Quantitative requirements (SCR, MCR, Technical Provisions)
- Pillar 2: Governance and risk management (ORSA)
- Pillar 3: Disclosure and reporting (public + regulatory)

Solvency Capital Requirement (SCR) reflects a 1-in-200 year event over 1 year.

Own Risk and Solvency Assessment (ORSA) is forward-looking and firm-specific.

Matching adjustment, volatility adjustment, transitional measures can alter liabilities.

Question 3

SOLVENCY II
Points to mention in exam (4)

Answer 3

Mention ORSA in any strategic or forward-looking risk context.

Refer to standard formula vs internal model when comparing capital strategies.

Discuss diversification, risk mitigation, and regulatory capital arbitrage.

Highlight market-consistent valuation in pricing/reserving comparisons.

Question 4

Basel III
Scope

Answer 4

Applies to international banks. Aims to improve the resilience of banks post-GFC by enhancing capital, liquidity, and leverage standards.

Question 5

Basel III
Key features

Answer 5

“CSD” = Capital, Supervision, Disclosure

Key Features:
Pillar 1: Minimum capital requirements
Pillar 2: Supervisory review
Pillar 3: Market discipline through disclosures

Capital split: CET1, Tier 1, Tier 2

Capital conservation and counter-cyclical buffers

Leverage ratio to limit excessive borrowing

Liquidity Coverage Ratio (LCR) — 30-day stressed liquidity

Net Stable Funding Ratio (NSFR) — long-term funding resilience

Question 6

Basel III
Points to mention in exam (4)

Answer 6

Use LCR or NSFR in liquidity risk scenarios.

Reference risk-weighted assets (RWAs) in credit/market risk discussions.

Mention Pillar 2 to justify enhanced oversight or governance.

Highlight capital buffer usability in stress events.

Question 7

IFRS17
Points to mention in exam (4)

Answer 7

Highlight how IFRS 17 increases comparability across insurers

Reference CSM in profitability, reserving, and product design questions

Mention data and model implications (system upgrades, assumptions)

Use in discussions about risk-adjusted performance metrics and capital strain