Welcome to risk & value matters

Winter 2009

The last 12 months has seen a substantial amount of change. The financial crisis worsened during the first quarter, but then eased allowing insurers and regulators to consider the best way forward. April saw the agreement of the Solvency II Framework Directive and CEIOPS published its draft advice on the Level 2 implementing measures in March, July and November. This draft advice has demonstrated a significant strengthening of the solvency requirements for insurers and has been met with some opposition from the industry. Concerns over the impact on the industry have made headline news and give further evidence that insurers need to be planning and preparing for Solvency II sooner rather than later. There were also financial reporting developments with amendments to the CFO Forum Market Consistent Embedded Value standards published in October, and insurers have since begun making significant investments in their risk management capabilities.

The pace of change seems unlikely to abate and this edition focuses on some of the key current and likely future themes for insurers, including the liquidity premium, the use of partial internal models, the shape of the ORSA, advances in risk aggregation techniques and recent Solvency II developments.

We very much hope that you find this edition of ‘risk & value matters’ useful to you and your organisation and we welcome your comments.

Contents

• Highlights of the 2009 ICA Credit Stress and Illiquidity Allowance survey
• Latest thinking on liquidity premia
• Partial internal models: anyone for PIMs?
• Non-linear Value-at-Risk
• Preparing for the Own Risk and Solvency Assessment
• Capital aggregation
• Solvency II and derivatives
• Copulas: art or science?
• Latest developments in Solvency II