For many firms, year-end 2017 will be the first time that they need to recalculate the Transitional Measure on Technical Provisions (TMTP relief), although some firms have already applied and received approval for a recalculation following material changes in their risk profiles.
Milliman consultants have experience in recalculating the TMTP relief for a number of clients, performing independent reviews of recalculated TMTP relief, and have provided assistance with the development and review of firms’ recalculation policies.
This update by Milliman’s Oliver Gillespie, Emma Hutchinson, Marie-Lise Tassoni, and Stuart Reynolds summarises findings from these exercises, along with our own views on different potential approaches to recalculating the TMTP relief and associated key issues and challenges.
Strengthening consumer protection has become a priority for insurance regulators in Europe. The Milliman Impact article “A level playing field: Conduct risk in Europe” examines the issues insurance companies and regulators must address to improve conduct risk under Solvency II.
Here’s an excerpt:
Globally, regulators are increasingly focused on consumer protection and mis-selling issues. “The UK and the US are ahead of the game when it comes to risk-based reporting and building regulation around the concept of consumer detriment, but many other markets, especially in Asia, are also looking to address these issues. They want to be seen as good places to do business and so are aligning their regulatory approaches with those of the more developed markets,” highlights Neil Cantle, principal at Milliman. …
…The need for senior management leadership will be key. The FSB identified the ‘tone from the top’ as a key indicator of the risk culture in major financial institutions in its initial report on conduct risk strategies in April 2014, and this has been embraced by the International Association of Insurance Supervisors and by EIOPA.
In particular, EIOPA has warned that the failure of many institutions and regulators to make the connection between conduct and prudential regulation has been a source of weakness in the past. It makes it clear in its Strategy towards a comprehensive risk-based and preventive framework for conduct of business supervision (published in January 2016) that “the interlinkages between conduct risk and the financial soundness of insurance undertakings and the stability of the financial system as a whole” will be a key focus as this agenda develops.
“In essence, it is about much more than the sales processes of individual insurance companies and intermediaries or even the potential reputational damage to the insurance industry. It is about ensuring financial stability and preventing any cross-contamination from poor conduct, whether that be product design, inappropriate sales incentives, poorly trained staff or inadequate monitoring,” outlines [Oliver Gillespie, principal at Milliman].
Recent market conditions offer a harsh reminder that big risks do occur and that sound risk management is neither a luxury nor an irrelevant burden. The complexity of the operating environment has led to regulation beginning to move away from rules and becoming principles-based, aligning capital requirements with the perceived risk levels of each business.
A recent Milliman white paper offers a reality check on what enterprise risk management (ERM) is and what it is not.