Solvency II

Solvency II and the Need for Risk-Based Approach

Solvency II introduces EU-wide requirements for a risk-based approach towards determining capital adequacy to reduce the likelihood of failure. Evolving from the accounting-based regulations in Solvency I toward a principles-based regime in Solvency II, the new directive sets out to provide a common regulatory approach to determining adequate levels of capital that insurers put aside to pay for future claims and unforeseen events. To be implemented in 2012, Solvency II calls for a more modern ‘risk-based’ regulatory approach that can adjust to the size and nature of individual firms businesses.

Solvency II promises better policyholder protection as there is less chance of an insurer failing because the capital it holds better reflects the risks facing it. In addition, a more efficient allocation of capital across the industry would ultimately be reflected in reduced costs for consumers. A successful Solvency II program improves the transparency of risk reporting, thereby providing a better understanding of how insurance companies are run, the risks they take and how they allocate their capital.

Solvency II Challenges

As companies prepare for the implementation of the Solvency II supervisory regime, many are struggling with the right approach to address key aspects of the directive:

Implementing a consistent approach to risk governance across the enterprise.
Aggregating risk at the line of business and group level.
Comparing quantitatively and qualitatively derived risk information.
Developing an internal model for risk management that includes an ORSA or Own Risk and Solvency Assessment that can be shared with regulators.
Disclosing publicly, at least annually, essential information on solvency and financial condition.

Benefits of Using OpenPages for Solvency II

OpenPages ORM (Operational Risk Management) can help insurers meet regulatory compliance with Solvency II by enabling insurers to deploy their own risk methodology without the complexity of a custom software development project. The solution automates the process of identifying, measuring and monitoring operational risk, integrating all risk data – risk and control self assessments, loss events and key risk indicators – into one single solution. OpenPages ORM combines powerful document and process management with a monitoring and decision support system that enables organizations to analyze, manage and mitigate risk in a simple and efficient manner.

Key Features to Help Meet Solvency II Requirements

Risk management methodology. OpenPages seamlessly adapts to your unique risk management methodologies while providing the flexibility to evolve risk and compliance processes over time.
Group-wide deployment and consistency
ORSA (Own Risk and Solvency Assessment) capabilities provide real transparency for insurers and enable organizations to document and evaluate their risk frameworks with Solvency II, including processes, risks, events, key risk indicators and controls.
Quantitative analysis is supported through the use of calculated fields that compute residual risk based on control ratings and automatically compute risk exposure based on risk data such as frequency and severity.
Import/export capabilities easily push and pull data from specialized analytical engines and capital modeling tools for more complex analytics.
Executive-level dashboard and reports provide visibility into key risk metrics and policy compliance.
Business process automation capabilities provide for real-time event escalation, automated risk processes, and streamlined remediation of issues and action items.
Loss event tracking lets risk managers track loss incidents and near misses, record amounts, and determine root causes and ownership.
Key risk indicators provide capabilities for tracking risk metrics and thresholds, with automated notification when thresholds are breached.

Request Information

For questions or for more information on meeting Solvency II requirements with OpenPages ORM please send us a message or call us at 781.693.5999.

Data Sheets:: OpenPages ORM

Press Analyst Reports:: Chartis Operational Risk Management Systems 2009 Market Analysis

White Papers:: Leveraging Bank Risk Management Practices for the Insurance Industry; Meeting the Solvency II Operational Risk Challenge