Are you ready for QIS4?
The next study on solvency capital requirements under the new Solvency II regulation will be released soon. All insurance companies were invited to participate in the development of the Solvency II framework directive several times and it becomes more and more important to do so. For all the participants in the QIS4 study their own results compared with the market results give a broader view on the solvency based capitalisation in the market environment. For each insurance company it is possible to benchmark their portfolio using one standard across the market. Even a drill down on the sources of risks e.g. market, credit and non-life insurance is possible.
The fourth quantitative impact study (QIS4) shapes the requirements on the necessary data for standard formula calculations even more. The released update of the QIS4 technical specifications shows the gaps between the data available by usual reporting standards and the data required by the standard formula. The specifications additionally include proxies to fill those gaps. So proxies open the door to QIS4, but do they suit your business?
One major issue can be identified: discounted claims reserving. Detailed, segmented claims reserves (IBNR) and their development pattern have to be available for all of the property casualty insurance business. Exceeding the available proxies, the actuaries need to be able to use standard reserving methods to calculate the absolute claims reserve and its development pattern on discounted bases to complete the QIS4 study.
Do you have the necessary tools available and do they comply with pillar one of the Solvency II regulation? If not, check out the upcoming PillarOne release on enterprise reserving.
-- Jörg Dittrich
