2004年-世界发展银行全球_On_the_Measurement_of_Solvency_of____________Insurance_Companies__Recent_Developments_that_will_Alter____________Methods_Adopted_in_Emerging_Markets_45页_382kb

Summary of "On the Measurement of Solvency of Insurance Companies"

Core Content

This working paper by Craig Thorburn explores the evolving landscape of insurance solvency measurement, particularly in emerging markets, and highlights the challenges and opportunities posed by recent international developments. The paper emphasizes the need for a more comprehensive and internationally harmonized approach to solvency assessment, given the increasing complexity of the insurance sector and the adverse operating conditions it faces.

Main Issues and Challenges

1. Difficult Operating Climate

• Catastrophic Risk: Increased frequency and severity of natural and man-made disasters have led to higher claim provisions, lower profitability, and reduced capital strength for insurance companies.
• Rate Cycles: Non-life insurers have faced prolonged soft markets, with significant declines in premium rates. Recent evidence suggests that the market may be peaking earlier than expected, leading to concerns about profitability.
• Asset Market Performance: Falling bond yields and equity prices have negatively impacted the investment returns of insurers, especially life insurers, which often have long-term liabilities.
• Official Concerns: Regulatory bodies have intensified their oversight of the insurance sector, with increased monitoring and transparency requirements.
• Capital and Ratings: Companies have raised capital to address solvency issues, but this has not been sufficient. Ratings agencies have downgraded many reinsurance firms, reflecting growing concerns.

2. Emerging Markets

• Emerging markets face unique challenges due to limited capacity and infrastructure.
• These markets are more vulnerable to the effects of global market liberalization and the implementation of new international standards.

Key International Developments

1. EU Solvency Reforms

• The EU has long been a model for insurance solvency regulation, with its system based on:
  • Conservative technical provisions.
  • Appropriate asset backing.
  • Fixed ratio solvency margin requirements.
• However, the system is under review due to its lack of sensitivity to asset risks, reliance on outdated metrics, and absence of forward-looking analysis.
• The EU is moving toward Solvency II, a more comprehensive and risk-based regime, to address these shortcomings.

2. IASB Developments

• The International Accounting Standards Board (IASB) is developing new accounting standards for insurance contracts, which will significantly affect solvency measurement.
• These standards will require a re-evaluation of existing solvency systems, as they introduce new methods for valuing and recognizing liabilities.

3. IAA and IAIS Developments

• The International Actuarial Association (IAA) and the International Association of Insurance Supervisors (IAIS) are working on frameworks to quantify insurance risk and determine capital requirements.
• The IAIS has introduced Principles on the Minimum Requirements for the Supervision of Reinsurers, which aim to improve transparency and harmonize global practices.

4. WTO Influence

• WTO accession agreements are influencing the regulatory environment, often leading to increased market liberalization and complexity.
• These changes require careful integration with solvency reforms to ensure consistency and effectiveness.

Common Themes

• Three Pillars Approach: The paper emphasizes the need for a multi-pillar framework that includes:
  • Pillar 1: Regulatory requirements and minimum capital standards.
  • Pillar 2: Supervisory review and risk management.
  • Pillar 3: Transparency and disclosure.
• Risk-Based Capital: There is a growing shift toward risk-based approaches, which better reflect the actual risk exposure of insurance companies.
• Integrated Risk Management: The paper advocates for a more holistic view of the enterprise, integrating asset and liability risks into a unified solvency assessment.
• Global Harmonization: International institutions are working toward a more consistent global regulatory framework, which will be a significant shift from current national practices.

Proposed Response

1. Phased Implementation

• A phased approach is recommended to implement new international standards, particularly in emerging markets where capacity is limited.
• Proactive measures are necessary to anticipate and address challenges during the transition.

2. National Discretion

• While international standards are being developed, national authorities retain discretion in their implementation.
• This allows for tailored approaches that consider local market conditions and regulatory environments.

3. Strengthening the First Pillar

• Enhancing the regulatory framework to ensure adequate capital levels and solvency margin requirements.
• This includes incorporating asset risk into solvency calculations and improving the accuracy of technical provisions.

4. Establishing a Strong Second Pillar

• Strengthening internal risk management systems to better assess and manage the firm's risk profile.
• This includes the development of more sophisticated models and the integration of qualitative risk assessments.

5. Building a Third Pillar

• Increasing transparency through improved disclosure practices and more detailed reporting requirements.
• This will help build trust and ensure that stakeholders have a clear understanding of the company's financial health.

Summary Conclusions

• The insurance sector is facing significant challenges due to adverse market conditions, including catastrophic risk, rate cycles, and poor asset performance.
• There is a growing need for a more comprehensive, risk-based, and internationally harmonized approach to solvency measurement.
• Emerging markets will face particular difficulties in implementing these new standards due to limited capacity and infrastructure.
• A multi-pillar framework, with a focus on regulation, risk management, and transparency, is essential for improving solvency assessment and supervision.
• A phased and proactive implementation strategy is recommended to ensure a smooth transition to the new regulatory environment.

References

• Swiss Re Sigma reports
• Lloyd's Quarterly Business Reports
• IMF Global Financial Stability Reports
• BIS Annual Reports
• Standard & Poor's data
• European Central Bank reports

Abbreviations and Definitions

Abbreviation	Definition
Basel Committee	The Basel Committee on Banking Supervision
Combined Ratio	For non-life insurers, this is the sum of the loss ratio and the expense ratio
EC	European Commission
EU	European Union
Expense Ratio	The ratio of expenses to earned premium, usually expressed as a percentage
FSAP	Financial Sector Assessment Program
FSF	Financial Stability Forum
IAA	International Actuarial Association
IAIS	International Association of Insurance Supervisors
IASB	International Accounting Standards Board
IFRS	International Financial Reporting Standard
Loss Ratio	The ratio of incurred claims to earned premium, usually expressed as a percentage
Non-life insurance	Used in this paper although some readers may be more familiar with the term “general insurance” or “property and casualty insurance”
Solvency	In this paper, solvency refers to the ongoing ability of an insurance company to meet its obligations as and when they fall due
Solvency Assessment	The practice of assessing the solvency of an insurance company
Solvency Margin Requirement	A regulatory requirement regarding the minimum surplus of assets over liabilities
Technical Provisions	Insurance company balance sheets hold, represented as liabilities, provisions for the payment of claims and other insurance related obligations