The scale and scope of the directive lies within the three main areas of:
* Valuation of assets/liabilities and the capital requirements arising to ensure policyholders get their claims paid within a satisfactory time frame.The use of a model or data obtained from a third party should not be considered to be a justification for exemption from any of the requirements for building a satisfactory internal model.
* Systems of governance and risk management, which includes, compliance, internal audit, and the actuarial functions.This system to cover at least, underwriting and reserving, asset liability management, investment in particular derivatives and similar commitments, liquidity, concentration and/or operational risk management, reinsurance and other risk mitigation techniques.
* Reporting and disclosure, which encompasses what information to report, how and to whom.Policyholders both existing and potential plus other interested parties should be better able to understand the business being carried out by the entity being regulated and covered by the legislation.
So if risk is a very subjective matter and dynamic in nature and effect, should you introduce an outside view to avoid group think and internal vested interests in the journey to compliance with the directive? The answer must be yes and reflection with a non interested party essential.
Some ideas on what that potential conversation could cover:
*Accumulations and aggregates of risk exposures, challenging key underlying assumptions
*Blind spots of experience and knowledge
*Correlations, crisis prevention and management, confluences of negative events
*Dated data, dread , dream, double or triple event scenarios and deep pockets syndrome
*Extended enterprise and stakeholder management, exposures inherent in the operations
*Fast forward thinking on current or past underwritten risk exposures
Ultimately there will certainly be some risks where the numbers will not be quantifiable but still need to managed in the name of risk management.
We hope you would like to talk to us and look forward to hearing from you soon.