A Solution for the three pillars of Solvency II (Pillars I, II, and III)
Solvency II is a European regulatory reform of the insurance sector. Solvency II fundamentally changes the manner in which the risks to which insurers are exposed are identified and quantified. It also has a significant impact on insurers’ coverage and investment strategies (management of assets and liabilities).
Solvency II is also an opportunity for insurers to implement a genuine risk and solvency management policy that matches their sales strategy, market and prospects for growth.
FrontERM for Insurance is a global risk and solvency management solution developed by eFront that meets the requirements of Pillars I, II and III:
- Calculation of Solvency II indicators according to the standard formula at the individual and group levels: SCR / MCR, Eligible Capital and solvency ratio, transversal view of the company’s risk profile (financial, technical, operational and business risks),
- Calculation and projection of balance sheet and business plan (ORSA capital)
- Continuously monitor company risk exposure according to risk appetite
- Optimization of the risk – profitability – solvency ratio,
- Regulatory reports (SFCR, RTS, QRT).
The main functionalities of FrontERM For Insurance are:
- A functional and customizable insurance repository allows your company to describe entirely his organization in expected granularity level.
- A standard Risk Management repository, hat guarantees regulatory compliance with Solvency II
- A central SII datamart used to collect and audit log all the data required for the three pillars
- A calculation and aggregation library according to the Standard Formula
- A data process collection (campaigns) designed to manage the data collection and reporting of indicators from subsidiaries to the group
- The audit logging of all inputs and outputs, the method used to calculate the SCR, MCR, eligible capital, solvency ratio and corresponding feedback (actual and simulations)
- Standard reports used to analyze and output the Pillar I indicators
Pillar II: ORSA, Governance, Risk and Compliance
- Produce a Holistic vision of the company’s risk profile (financial, technical, operational, etc.)
- Monitor the company’s exposure to risks, in view of its risk appetite
- Keep track of the solvency coverage rate (group / subsidiaries / levels of consolidation)
- Carry out forward-looking simulations (central scenario and stress tests) in a simple calculation environment in order to analyze:
- the risk profile and balance sheet (projection of the business plan over different periods)
- deviation from the risk profile and prudential balance sheet in stressful situations
- analysis of the sensitivity of the risk profile and prudential balance sheet
- aggregation as per the standard formula
- Define/configure proxies using the solution’s libraries: LSMC proxies, polynomial functions, pricing function, VAR calculation,
- Send alerts when thresholds/limits are exceeded with regard to the risk budgets (consumption of capital)
- A GRC (Governance, Risk & Compliance) solution for qualitative aspects of Solvency 2: Risk management, internal control and internal audit
- An interface with quantitative and narrative regulatory reporting tools on the market