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AIMS listed Insurance Group

Development of internal Solvency II model

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AIMS internal Solvency II model

Client description AIMS listed Insurance Group

 

The Client’s requirements

Development of internal Solvency II model for their UK regulated risk carrying entities, administered by Pro. The exercise was undertaken to ensure future strategic options for the group were covered.

 

Our solution
Liaised with FSA and completed standard template to enable assessment against the pre-application qualifying criteria
•An internal model approval process (IMAP) pre-application document was completed and submitted to the FSA
•Project plan created and initiated to ensure there was no hold up in the final delivery timeframe
•All continued FSA feedback and requests were incorporated into the plan as the project progressed
•Developed a model for each risk carrier

  • stochastic model of the future cash flows, with each risk carrier having a different set of input parameters and allowed for all
  • areas of business risk - reserving, market, liquidity, operational, credit and group and was built on a long-standing platform of stochastic cash-flow models used for capital purposes (previously FSA had agreed to substantial capital releases on the basis of the modelling work

•The model covered different P&C risk areas including , health hazards and environmental risks, Directors and Officers and Errors and Omissions policies and exposures affected by natural catastrophe. The total liabilities covered by the model at one point were of the order of $500m
•Particular attention was paid to the validation approach for the model, with an independent internal team identified in order to Particular attention was paid to the validation approach for the model, with an independent internal team identified in order to testing, statistical analyses and alternative models


Services/Value delivered
•Internal model built with ten sub models, their documentation and verification
•A full Solvency II programme with appropriate governance was established with a gap analysis assisting in the identification of areas that the programme needed to concentrate its efforts on
•A full review of operational documentation was also undertaken to ensure that processes had been correctly identified, reviewed and revised with a process established for iterative testing and amendment
•The groups risk management and internal audit practice was also reviewed and appropriate steps were taken to ensure that the group established new appropriate functions that ensured risk management was embedded in the internal model
•Other aspects including change control, governance and review of data integrity and infrastructure all formed part of the project and ultimately business changes were successfully implemented as a result.

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