Solvency II in the Insurance Industry: Application of a Non-Life Data Model

236 Pages·2018·6.75 MB·English

by  Maria Heep-Altiner

Contributions to Management Science
Maria Heep-Altiner
Martin Mullins
Torsten Rohlfs Editors
Solvency II in
the Insurance
Industry
Application of a Non-Life Data Model
Contributions to Management Science
Moreinformationaboutthisseriesathttp://www.springer.com/series/1505
(cid:129) (cid:129)
Maria Heep-Altiner Martin Mullins
Torsten Rohlfs
Editors
Solvency II in the Insurance
Industry
Application of a Non-Life Data Model
Editors
MariaHeep-Altiner MartinMullins
InstituteforInsuranceStudies(ivwKöln) DepartmentofAccountingandFinance
THKöln–UniversityofAppliedSciences KemmyBusinessSchool,Universityof
Cologne,Germany Limerick
Limerick,Ireland
TorstenRohlfs
InstituteforInsuranceStudies(ivwKöln)
THKöln–UniversityofAppliedSciences
Cologne,Germany
ISSN1431-1941 ISSN2197-716X (electronic)
ContributionstoManagementScience
ISBN978-3-319-77059-8 ISBN978-3-319-77060-4 (eBook)
https://doi.org/10.1007/978-3-319-77060-4
LibraryofCongressControlNumber:2018961562
©SpringerNatureSwitzerlandAG2018
Thisworkissubjecttocopyright.AllrightsarereservedbythePublisher,whetherthewholeorpartofthe
materialisconcerned,specificallytherightsoftranslation,reprinting,reuseofillustrations,recitation,
broadcasting,reproductiononmicrofilmsorinanyotherphysicalway,andtransmissionorinformation
storageandretrieval,electronicadaptation,computersoftware,orbysimilarordissimilarmethodology
nowknownorhereafterdeveloped.
Theuseofgeneraldescriptivenames,registerednames,trademarks,servicemarks,etc.inthispublication
doesnotimply,evenintheabsenceofaspecificstatement,thatsuchnamesareexemptfromtherelevant
protectivelawsandregulationsandthereforefreeforgeneraluse.
The publisher, the authors and the editors are safe to assume that the advice and information in this
bookarebelievedtobetrueandaccurateatthedateofpublication.Neitherthepublishernortheauthorsor
theeditorsgiveawarranty,expressorimplied,withrespecttothematerialcontainedhereinorforany
errorsoromissionsthatmayhavebeenmade.Thepublisherremainsneutralwithregardtojurisdictional
claimsinpublishedmapsandinstitutionalaffiliations.
ThisSpringerimprintispublishedbytheregisteredcompanySpringerNatureSwitzerlandAG
Theregisteredcompanyaddressis:Gewerbestrasse11,6330Cham,Switzerland
Preface
TheSolvencyIIFrameworkcameintoeffecton1stJanuary2016.Thescopeofthe
new Act is considerably more wide-ranging and complex than previous legal
structuresandisbasedonthreedistinctpillars.Inthispublication,themostimpor-
tantSolvencyIIapplicationsarethereforeillustratedpillarbypillarandtheconsis-
tent data model of the so-called IVW Private Lines applied in order to provide a
comprehensive overview of the regulatory structures and to afford stakeholders a
betterunderstandingoftheframeworkasawhole.
Theinsuranceindustryplaysacrucialroleinbothsocialandeconomicterms.It
facilitates risk transfer for both companies and individuals, thus creating a more
sustainablefutureforallofus.Inanagemarkedbyahighdegreeofunpredictability,
be it global warming or emerging technologies, insurance provides a crucial set of
services.Hence,adegreeofoversightonthepartofthepoliticalauthoritiesatboth
nationaland,inthisinstance,supranationallevelsisrequired.
TheregulatoryregimeinplaceforEUinsurersimmediatelypriortoSolvencyII
wasnolongerappropriatefortheevolvinginsuranceindustry.Thisledtoamajor
overhaul project: the design and implementation of a new comprehensive frame-
workknownasSolvencyII,basedonthecoreSolvencyIIDirective.Thiscomplex
process began a decade ago, and in 2016, Solvency II came into effect across
theEU.
This publication has been developed within a combined teaching and publi-
cation project wherein master students of the Institute of Insurance Studies at the
Cologne University of Applied Sciences (TH Köln) produced written work on
SolvencyII.Thisprojectwasundertakenincollaborationwithacademicsfromthe
THKölnandincooperationwithresearchersfromtheUniversityofLimerick.The
project as a whole has been supported by project teams from the TH Köln and the
UniversityofLimerick.
Our aim was both to improve the pedagogical experience of our students and
provide a valuable resource for stakeholders in the insurance industry and those
working in actuarial sciences. The Cologne Institute of Insurance Studies has
extensive experience in book production projects, and on this occasion, this has
beenfurtherenhancedbytheinternationalcooperationofourcolleaguesinIreland.
v
vi Preface
Wewouldliketothankallorganisationsandpeoplethathavesupportedusduring
thisproject,especiallytheInstituteofInsuranceStudiesattheCologneUniversityof
AppliedSciencesandtheKemmyBusinessSchoolDepartmentofAccountingand
FinanceattheUniversityofLimerick.
Cologne,Germany MariaHeep-Altiner
Limerick,Ireland MartinMullins
2017 TorstenRohlfs
Preliminary Remarks
Thedatamodelofthenon-lifeinsurer“IVWPrivateLines”hasbeencreatedasan
instructiveexampleforalectureserieswithrespecttofinancialmanagementaswell
as risk management in the insurance industry. From some simple chain ladder
trianglestoacompleteaswellasverycomplexEXCELoutput,themodeldeveloped
coversallthreeSolvencyIIpillars.
Whiledevelopingthismodel,partsofithavebeenpublishedwithinthepublica-
tionseries“ForschungamivwKöln”(ResearchattheCologneInstituteofInsurance
Studies, ISSN (online) 2192-8479) on the open access platform Cologne Open
Science (COS) in German language. Those relatively technical COS publications
coverparticularaspectsaslistedinthetablebelow.
Volume Topic Link
06/2015 Keyelementsofpillar1,especially https://cos.bibl.th-koeln.de/
standardformulaandpartialmodel. frontdoor/index/index/docId/65
10/2015 Keyelementsofpillar2,especiallyrisk https://cos.bibl.th-koeln.de/
management&ORSA. frontdoor/index/index/docId/156
06/2016 Keyelementsofpillar3,especiallyreporting https://cos.bibl.th-koeln.de/
andprocessrequirements. frontdoor/index/index/docId/345
07/2016 Additionaltopillar1,requiredcapital https://cos.bibl.th-koeln.de/
viainternalmodel. frontdoor/index/index/docId/371
04/2017 Additionaltopillar1,availablecapital https://cos.bibl.th-koeln.de/
viamarket-consistent-embeddedvalue. frontdoor/index/index/docId/473
Thepublicationslistedabovehavealsobeenusedasthebasisforseveralmono-
graphs with respect to financial and risk management in the insurance industry. In
consequenceoftheoriginalauthorshipthen,manycitationswithrespecttothedata
modelinthisdocumentrefertotheoriginalCOSpublicationsortothesubsequent
monographs,allofwhichareinGermanlanguage.
Inthismonograph,thedatamodelistreatedasawholeforthefirsttimeinorder
to illustrate the three pillars of Solvency II. This is achieved step by step in a
consistent and not overly technical manner. Nevertheless, working with a data
modelnecessarilyaffordssomemathematicalrequirements.
vii
viii PreliminaryRemarks
Intro-
duc(cid:2)on
Base Informa(cid:2)on
& NL Data Model
Pillar 1 Pillar 2 Pillar 3
Balance Info. Cl. Ra(cid:2)os Qualita(cid:2)ve
& Business Str. for MCEV Repor(cid:2)ng
Available Risk Manage- Narra(cid:2)ve
Capital Struct. ment & ORSA Repor(cid:2)ng
of SF
Economic Risk Param. Quan(cid:2)ta(cid:2)ve Input for
Balance Info. for CoC etc. Repor(cid:2)ng Reports
Standard Value Based QRT in
Formula Management General
Covar.
Decomp.
SCR Decom- Cost Part of
posi(cid:2)on Info all QRT
Par(cid:2)al Business Public QRT
Model Risk Cat. Cl. Plan Mapping Data
Parametr. Map Ra(cid:2)o Planned Deriv. from Base
Informa(cid:2)on Scenario Public QRT
Risk
Internal Info Risk Public QRT
Cat Model Simulated Control Risk Control Key Indicator
Risk Scenario by Public
Fig.1 Structureofthedatamodelapplications
The presentation of the data model in this publication starts with a general
overview on Solvency II together with the introduction of the key elements of the
non-lifedatamodeloftheso-calledIVWPrivateLines.
This data model will be illustrated pillar by pillar where Fig. 1 highlights the
interrelationsbetweenthechaptersandtheirsubsections.
In the introduction, general information with respect to the data model is
presented. In each section, the individual information required will be provided.
However, in some more complex cases, information needed in a section will be
providedinasubsequentsection.
Contents
1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
MariaHeep-Altiner,MartinMullins,TorstenRohlfs,SvenjaHintzen,
SimonMuders,BarrySheehan,andFlorianVennemann
2 ApplicationoftheDataModel:PillarOne. . . . . . . . . . . . . . . . . . . . . 23
MariaHeep-Altiner,MartinMullins,TorstenRohlfs,FabianClasen,
GabrielGallinger,MartinGerlach,ValeriaKeller,AndreLoeken,
HarryMoor,TeresaOlbrich,JakobSchwering,andBarrySheehan
3 ApplicationoftheDataModel:PillarTwo. . . . . . . . . . . . . . . . . . . . 85
MariaHeep-Altiner,MartinMullins,TorstenRohlfs,AnnaBaklanov,
LarsDirking,LexHamélius,LauraKlünker,WolfgangKoch,
MarieMöllers,PhilipMüller,AlexandraPeter,CianRyan,
andChristophVenderbosch
4 ApplicationoftheDataModel:PillarThree. . . . . . . . . . . . . . . . . . . 141
MariaHeep-Altiner,MartinMullins,TorstenRohlfs,MariusEberle,
ManuelFalk,VanessaHaeusler,RaphaelKuhn,NicolasLimberg,
KonradSchultheiß,FabienneSebralla,andDarrenShannon
Appendices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201
Glossary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209
Index. . . .. . . .. . . .. . . .. . . .. . . .. . . .. . . .. . . .. . . .. . . .. . .. . . .. 217
ix