Solvency II and the value for reinsuranceAs a reinsurer, we view the use of this newly accessible information from the Solvency II public disclosures as key in three different areas: individual client information, market benchmarking and pricing analysis, and increasing reinsurers’ ability to deliver more tailored solutions to their clients.
Individual client informationIndividual client information: for fundamental “Know Your Client” purposes, feeding and enhancing the reinsurance underwriting process: The underwriting process should be fed by as broad an information stream as possible, to enable reinsurers to reliably assess their clients’ risk appetite and risk transfer needs, both of which translate into their reinsurance buying structure and pattern over time. While reinsurers already have information on certain risks and programmes that goes well beyond what is provided in the Solvency II disclosures, the SFCRs provide a useful holistic framework, including information and data on parts of the business that may never have made it to the reinsurance market – whether due to deliberate non-disclosure or simply because the information was not produced before, at all or on a regular basis. This information can take the form of either qualitative disclosures, such as those found in the SFCRs on system of governance or risk profile, or quantitative data as presented in the QRTs. While the quantitative data gives valuable information on business performance and balance sheet solidity, the qualitative disclosures provide the background on the risk management culture and control framework. The interaction of these two sources of information can provide important insights into the management of a client’s business.
Market benchmarkingand pricing analysisAs time series become available with annual releases, public QRTs will become key sources of information for risk assessment and valuation or pricing purposes. This is particularly true for Line of Business disclosure (premiums and reserves), which is provided gross and net of reinsurance for individual (“solo”) entities and groups, leading to market and line of business benchmarks built from a more complete and comparable data set than previously. Outliers will therefore become more easily identifiable, leading to a better relative positioning analysis of each insurer in a given market.
Delivering moretailored reinsurance solutionsInsurers’ discretion when disclosing information to their reinsurers will be reduced as SFCRs will disclose information on portfolio subsets that might be unknown to external capital providers (reinsurance, debt, equity, etc.). This increased disclosure is an additional incentive for insurers to be as transparent as possible to their stakeholders, and a tool for these stakeholders to be more autonomous when providing capital and earnings’ volatility management solutions to insurance companies. Reinsurers will potentially be able to propose solutions for their clients proactively, based on a wider information set than that contained in broker information packs.
Deep dive into the QRTs of selected insurance marketsWe illustrate the above points by providing the standard analysis we produce on insurer and market benchmarks using a number of Nordic insurers and markets. The publication of QRTs (both for solo entities and Groups) as part of the SFCRs allows all stakeholders to analyse the balance sheet structure and P&L performance of all insurance companies, and to benchmark them against each other. This can be done within a single market, or by comparing similar companies across markets. The information provided can generally be divided into 3 different types:
- Solvency position and balance sheet structure
- Operating performance
- Approach to reinsurance