Solvency II is a major and comprehensive reform for the insurance sector. It will have deep and long-lasting impacts on the way insurers look at risk : how they identify and anticipate it, how they measure it, how they manage and mitigate it.
Solvency II opens new questions, which will force many insurers to revisit significant elements of their business models and reconsider the way they operate. For example: how to compete on the market place, taking advantage of the new solvency principles (such as diversification); how to structure their business (e.g. under a group holding, through joint ventures, by outsourcing major operations, etc.); how to organise the decision-making process about risk-taking.
Finally, getting there will not happen overnight. Insurers may have managed insurance and financial risks for many years, but Solvency II changes the reference for risk management – it is not just about marginal improvements. The Solvency II project will need to overcome several challenges : driving a large project to completion while the underlying regulation is still moving, improving the quality and traceability of the data that feed the risk management processes, implementing the tools to measure risk (be it a standard formula or a more sophisticated internal model), embedding the risk management culture in the insurer’s organisation and fostering along the way the cooperation of stakeholders with complementary points of views about risk.
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