[Misconduct] FCA's Review on Management and Monitoring of Appointed Representatives

1. In July 2016, the Financial Conduct Authority (FCA) published a thematic review titled "Principals and their appointed representatives in the general insurance sector" and has voiced concerns over ways in which non-life firms and intermediaries manage and monitor appointed representatives (ARs). 

[Framework] Stress Testing and Capital - Part 2 - Stress Testing Process and Integrating with Capital Model

CAPITAL MODELS
1. Internally developed risk capital models can serve many useful purposes and are increasingly becoming a core part of many insurers’ risk and capital management processes.

2. Capital models can vary considerably in their structure, calibration and application.

[Framework] Stress Testing and Capital - Part 1 - Overview, Process, & Management Action

OVERVIEW
1. What is a stress? What are the regulatory history and roles? What is a Stress test process?

2. Including stress scenario and stochastic models and overlay the scenario in the model.

3. Limitations and thoughts.

Alternative Capital and Risk Transfer Trends

TYPES OF ALTERNATIVE CAPITAL MARKETS
1. Catastrophe Bonds - A risk-linked debt security that transfers a specified form of catastrophe risk from a company to investors.

2. Collateralized Reinsurance - A reinsurance agreement that is fully collateralized, typically by unrated third party capital

3. Side Cars - A limited purpose company created to assume a pre-defined portion of insurance policies from an issuing insurance carrier

4. Collateralized Industry Loss Warranty - A contract that pays out for events greater than a pre-defined loss threshold.

[Framework] Solvency Assessment of Insurance Companies - Part 3 - Solvency Capital

REGULATORS
1. the 'solvency capital' is required for various reasons from the regulatory point of view.

2. To reduce the likelihood of the insurer not meeting liabilities when they fall due

3. To provide a cushion to limit the losses, in the event of insolvency

4. To provide an early warning system for regulatory intervention and early corrective action

5. To promote the confidence of the general public 

[Framework] Solvency Assessment of Insurance Companies - Part 2 - Analyse and Quantify

Covering market risks, operational risks, liquidity risks and analyzing risks and quantifying financial impacts.

[Framework] Solvency Assessment of Insurance Companies - Part 1 - Common Risks

1.  In some countries, the supervisory authorities have an integrated risk classification system for the insurance and banking industries. Each Authority has identified their own set of risks. refer table at bottom of posts.

Reserving - Part 2 - Expected Loss Ratio

EXPECTED LOSS RATIO METHOD
1. Uses expected ultimate loss ratios to project ultimate losses.

2. Expected ULR is based on trends of past data, underwriter's view, industry loss ratio, pricing targeted loss ratio.

3. Insurers often use the expected loss ratio on the amount and quality of data that is available and does not take into account actual paid losses.

4, The lack of sensitivity to changes in reported and paid losses makes it less accurate and less useful.

Reserving - Part 1 - Incurred vs Paid Claims Chain Ladder

PURPOSE OF RESERVING
1. Delay between claim event and claim settlement date.

2. The ultimate claim cost will only be known after some time.

3. Must set up reserves in respects of those claims to be settled.

Operational Risk Management Assumptions & Judgement

1.Many insurers today adopt Basel definitions (e.g. controls, IT, fraud etc.) but they might not be applied in the same way across industry.

2. Operational risk data restrictions and limitations hinder its known true loss distribution.

Rate Making - Part 3 - Multivariate, Bailey's Minimum, Curve Fitting

MULTIVARIATE TECHNIQUES
1. Many rating variables are correlated.

2. Using a multivariate approach removes potential double-counting and can account for interaction effects.

Rate Making - Part 2 - Deductible Credits and Loss Elimination Ratio

DEDUCTIBLE CREDITS
1. Insurance policy pays for losses left to be paid over a fixed deductible

2. the losses remaining is a deductible credit 

Rate Making - Part 1 - Anti Selection, Rate Relativity, and Credibility

WHY IS THERE A NEED FOR RATE RELATIVES?
1. Individual Insureds differ in potential risk and amount of insurance coverage.

2. We can ensure each group pays its share of losses and avoid anti-selection while ensuring fair discrimination.

Thoughts on Business Intelligence For General Insurance Detariff

This post discusses the common types of underwriting levels, impact from competition during detariff and some thoughts and expectations on the detariff market.

[Framework] Insurer's Financial Rating - Part 2 - ERM

ERM

1.  ERM should become a natural extension of an insurer’s fundamental risk management practices, with the foundation still rooted in sound traditional controls and policies encompassing the five key categories of risk: credit, market, underwriting, operational and strategic.

2.  ERM encompasses three key areas - Culture, Identification and Management, and Measurement.

[Framework] Insurer's Financial Rating - Part 1 - Risk Management

RISK MANAGEMENT
1. Risk management is the process by which companies systematically identify, measure
and manage the various types of risk inherent within their operations.

2 Important to note that the objective of risk management is not to eliminate
risk and volatility, but to understand it and manage it.

3. Below are the key risk management trends in the insurance industry and describes how risk management impacts the overall rating process and the development of capital requirements. 

Re/insurers Risk Accumulation - Part 2 - Measuring Risks Accumulation

1. This post will cover a brief summary of the capabilities of loss severity models (LSM)

2. We will look at how technology assists in identification and management of risk accumulations.

3. And to highlight the crucial validations and steps in the underwriting process.

Re/insurers Risk Accumulation - Part 1 - How Risks Accumulates

1. In previous post I have covered business nature of reinsurers, RI's diversification, asset-liability management, & capital management.

2. Link as follow <http://levelnineatwork.blogspot.my/2014/12/products-3-in-1-liablity-product-bundle.html>

3. The rapid increase of insurable assets in areas prone to natural catastrophes creates accumulation risks which offers both challenges and opportunities for re/insurers in the region.

4. Re/insurers must find ways to manage risks accumulation.

[Misconduct] Transitions Management Failings

"State Street UK has been fined £22,885,000 by the Financial Conduct Authority (FCA). State Street UK’s Transitions Management (TM) business had developed and executed a deliberate strategy to charge clients substantial mark-ups on certain transitions, in addition to the agreed management fee or commission."
Published:  31/01/2014
Source: fca.org.uk

Understanding A Detariff Market - Part 3

Continuation from Understanding A Detariff Market - Part 2