Under Solvency II, reserving risk takes on a different meaning, based on the change in the estimated ultimate loss over a one-year time horizon, which accounts for the payments during the one-year time horizon and the consequences for future payments (i.e., the change in reserves) after the one-year time horizon. A number of models—most notably those developed by Mack in 1993 and later refined by Merz and Wüthrich—have provided insurers well thought out and documented approaches for determining reserve variability and estimating unpaid claims on an ultimate time horizon and one-year time horizon, respectively. This article by Milliman consultant Mark Shapland offers perspective.
This article was originally published in The European Actuary, November 2019.
The recent increase in the amount of data generated, stored and analysed by insurers to establish their pricing and underwriting policies has led to the emergence of new needs both from a regulatory point of view, with the recent implementation of the European framework of the General Data Protection Regulation (GDPR) and with a view to offering new services on the market (cyber risk).
Milliman consultant Thomas Poinsignon recently explore the development and analysis of actuarial methods within the default security framework—a principle of the GDPR imposed on companies using personal data.
The objective is to extend the elementary mathematical concepts and models used when developing classic non-life insurance pricing models (simple linear regression and generalised linear models) to their use on secure data in accordance with regulatory requirements.
To learn more, read Thomas’s paper, entitled ‘Research on non-life pricing procedures on encrypted and anonymous data under the GDPR.’
(Re)insurance undertakings across the European Union published their second set of Solvency II public reports, the Solvency and Financial Condition Reports (SFCRs) in 2018. In this report, Milliman’s Derek Newton, Marc Smillie, and Flavien Thery analyse and compare the quantitative information contained in the Quantitative Reporting Templates (QRTs) and the text within SFCRs across a number of European non-life insurers.
The analysis of the non-life market covers 870 companies from 15 countries listed, which together comprise more than £326 billion of gross written premium and nearly £475 billion of gross non-life technical provisions. The report focuses on solo entities rather than groups and includes comparison of the 2017 year-end SFCRs with the 2016 year-end SFCRs.
In this report, Milliman consultants provide a summary of the key solvency information of the main life and non-life insurance entities in the Netherlands based on Solvency and Financial Condition Reports as per year-end 2017. It also compares the figures per year-end 2016 and 2017 of these insurance entities in the Netherlands as well as the main figures of the largest consolidated insurance groups.
In May 2018, the first Solvency and Financial Condition reports (SFCRs) were published for year-end 2017. These reports contain a significant amount of data in the Quantitative Reporting Templates (QRTs), including information concerning the company’s performance over the reporting period, system of governance, risk profile valuation basis and capital requirements.
In this report, Milliman consultants provide a summary of SFCRs and the main players in the Belgian market for both life and non-life undertakings. The report focuses on a subset of the largest insurers in Belgium and compares year-end 2017 results with year-end 2016 results in terms of the Solvency Capital Requirement (SCR), written premiums, technical provisions and technical result.
Solvency II came into effect on 1 January 2016 and introduced a number of disclosure requirements for European insurers. Under the new requirements, the majority of European insurers were required to publish detailed Solvency and Financial Condition Reports (SFCRs) for the first time in May 2017. The SFCRs contain a significant amount of information on the insurance companies, including details of their business performances, risk profiles, balance sheets and capital positions, amongst other topics. Insurers are also required to publish a great deal of quantitative information in the public Quantitative Reporting Templates (QRTs) included within the SFCRs.
One year later, the majority of the European insurers published their SFCRs for year-end 2017, providing an opportunity for more detailed comparisons among insurers over the last two years.
A new Milliman report compares the information provided in the QRTs and SFCRs to draw some conclusions about the balance sheets and risk exposures of Luxembourg insurers. The analysis focuses on the differences between 2016 and 2017.