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Agenda
Operational risk under Solvency II Challenges of internal modelling How ORIC fits in
SOLVENCY II
PILLAR 1 Quantitative requirements Risk-based capital requirements MCR SCR: standard approach versus internal modelling PILLAR 2 Supervisory activities and internal risk governance Identification of risks not captured under Pillar 1 Supervisory review ORSA should cover risk identification, measurement, management, reporting and monitoring PILLAR 3 Reporting and disclosure Improve private and public risk disclosure Market-consistent valuation More transparency (firms risk profile & management practices)
2010
Level 2 implementing measures
2011
2012
April - October Entry into FSAs pre-application process April 2010 H2 2011 p IM application process runs
Standard SCR
PROVISIONS
MAX of
Capped at X% of BSCR
PREMIUMS
IM is tool to better understand firms risk profile criteria: Model scope scope, architecture and development plans Timeline, methodology, tests, statistical quality, documentation Model governance, change policy (for full and partial models) Group issues (for complex groups)
Pre-application timeline
P&L attribution
Validation
Calibration
Model g governance
Documentation
OpRisk M&M
Internal loss data
ORM
Selfassessments Scenarios
Written Premiums Technical Provisions/Insurance Liabilities Non-financial Assets Number of FTEs Operating Expenses
Example of scaling
Internal losses only
0.6
0.5
0.5
0.4
0.4
Probability
Probability
9 10 0 11 1 12 2 13 3 14 4 15 5 16 6 17 7 18 8
0.3
0.3
02 0.2
0.2
0.1
0.1
0.0
10
12
14
16
Input
BetaGeneral
Input
Lognorm
18
Thank you!
For more information
Mariano Selvaggi, Head of ORIC +44 (0)20 7216 7387 Mariano.Selvaggi@abi.org.uk i l i bi k
www.abioric.com bi i