Riassunti VERIFICATO
Dispensa completa di Accounting and Management in Insurance modulo 1
Cattolica del Sacro Cuore statistical and actuarial sciences Curriculum actuarial sciences for insurance 2021
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- The Financial Statement (FS) of an insurance company aims to inform external stakeholders (shareholders, policyholders, creditors, authorities) about performance and financial strength, aligning with IAS/IFRS objectives. A complete FS includes the Balance Sheet, Income Statement, Statement of Changes in Equity, Statement of Cash Flows, and Notes.
- Complexity in Insurance Reporting stems from differences in accounting between insurance and other enterprises, variations between non-life and life business, diverse global reporting standards (with IFRS 17 upcoming), and varied measurement criteria (e.g., local GAAP vs. IAS/IFRS).
- Three Dimensions of Management: Value, Risks, and Performance are central, with the Balance Sheet and measurement criteria for assets (financial instruments) and liabilities (technical provisions) forming the core. Measurement bases include Historical Cost (Amortised Cost, Locked-in Technical Provisions) and Current Value (Fair Value, Fulfilment Value, Embedded Value).
- Solvency II Framework (Directive 138/2009) primarily aims at policyholder protection, treating "own funds" as a loss absorber, distinct from traditional equity. Its secondary objectives include financial stability and fair markets.
- Risk-Based Approach encourages proper measurement and management of risks, establishing a direct link: "more risks, more capital." This approach relies on quantitative risk measurement, strong governance, and transparent disclosure.
- Three Pillars of Solvency II:
- Pillar I (Quantitative Requirements): Focuses on the economic balance sheet (assets, technical provisions, own funds) and capital requirements (Solvency Capital Requirement - SCR and Minimum Capital Requirement - MCR).
- Pillar II (Governance and Supervisory Review): Mandates governance requirements, risk management (Own Risk and Solvency Assessment - ORSA), and the supervisory review process.
- Pillar III (Reporting and Disclosure): Requires public disclosure (Solvency and Financial Condition Report - SFCR, Quantitative Report Templates - QRT) and regular supervisory reporting.
- EU Harmonization (Lamfalussy approach) provides a multi-level regulatory structure: Framework Directive (Level 1), Implementing Measures/Delegated Acts (Level 2), Technical Standards (Level 2.5), and EIOPA Guidelines (Level 3), with rigorous enforcement (Level 4).
- Market Value Balance Sheet (MVBS) is a full fair value balance sheet used in Solvency II to compute basic own funds. It differs from traditional Financial Statement Balance Sheets (FSBS) in how own funds/equity are configured and in measurement criteria, leading to BOF volatility and potential procyclicality.
- Own Funds and Tiering: Own funds (Basic Own Funds + Ancillary Own Funds) are classified into three tiers (Tier 1: high quality, Tier 2: intermediate, Tier 3: low quality) based on their loss-absorption capacity, with strict eligibility limits to cover SCR and MCR.
- Solvency Capital Requirement (SCR) is the Value-at-Risk of basic own funds at a 99.5% confidence level over a one-year period, covering non-life, life, health underwriting, market, credit, and operational risks. It is computed via a standard formula or internal models, considering diversification effects.
- Minimum Capital Requirement (MCR) is a simpler, linear function of key variables (e.g., technical provisions, premiums) calibrated at 85% VaR, serving as a minimum security level. It must be between 25% and 45% of SCR.
- Non-compliance with SCR or MCR triggers immediate notification to the supervisory authority and requires a recovery or finance scheme to be submitted and implemented within strict deadlines, with authorization withdrawal as the ultimate consequence. Anti-procyclical measures, like extensions for recovery, can be applied in adverse market situations.
- To improve the Solvency Ratio, companies can increase eligible own funds (e.g., new equity, subordinated debt) or decrease risks (e.g., underwriting, market, improved diversification).