What is the equation for solvency?
assets > paid claims + unpaid claims + operating costs
What are the objectives of solvency II?
- better regulation
- deeper integration into the EU market
- enhanced policy holder protection
- improved competititveness of EU insurers
What are the three pillars of solvency II?
- quantitative requirements
- supervisory view
- disclosure
What is solvency capital requirement?
amount insurer must keep of assets in excess of liabilities
What is minimum capital requirement?
Lower than SCR, if breached regulatory intervention likely
What are example business risks faced by insurers?
- credit / counterparty risk
- market risk
- operational risk
- liquidity risk
- group and capital risk
- enterprise risk
What are EIOPA’s core responsibilities?
- increase stability of the financial system and transparency of markets and financial products
- protection of policyholders
Who carries out day to day supervision of Solvency II in the UK?
The PRA
Describe the chain of security at Lloyd’s
- syndicate’s premiums
- if premiums not sufficient to pay claims, member’s funds at Lloyds can be used
- Central fund is the absolute backstop, all insurers contribute 0.35% of their written premium annually
What do rating agencies look at?
- ability to pay claims
- operating performance
- business profile
What happens if broker chooses insurer that can not pay claims?
They could be liable to a professional negligence claim
What happens if an insurer’s rating drops?
may lose business
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Chapter 1 - Business nature of the London Market19
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Chapter 2 - Risks written in the London Market74
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Chapter 3 - Reinsurance31
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Chapter 4 - Market Security12
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Chapter 5 - Legal and Regulatory Requirements18
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Chapter 6 - Insurance Intermediation20
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Chapter 7 - Underwriting18
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Chapter 8 - Business Process33
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Chapter 9 - Delegated Underwriting21
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Chapter 10 - Claims Handling19
