Solvency II

Solvency II is a comprehensive risk management solution for insurance companies that enables firms to comply with all facets of the Solvency II directive while providing the foundation for improved strategy and performance.

An End-to-End Regulatory Solution

Capital Calculation (Pillar I)

SII offers a complete solution for the two key capital calculations of Pillar 1: the Minimum Capital Requirement (MCR) and Solvency Capital Requirement (SCR). A key strength of the solution is its ability to calculate SCR, the key control that requires quantification of all types of risks insurers face, including insurance risk, market risk, credit risk and operational risk.

Risk Management Assessment (Pillar 2)

Data management, security, auditability and supervision are among the embedded functionalities of our platform which enables firms to demonstrate risk management. Pillar 2 also requires Own Risk and Solvency Assessment (ORSA) which aims to accurately capture a firm’s unique risk profile. SII provides an enterprise risk management framework for ORSA requirements by being able to provide multi-year financial projections, advanced modeling capabilities and a complete framework to deal with scenarios and stress testing.

Reporting (Pillar 3)

All the reports required by the mandate can be delivered through SII’s Regulatory Reporting Tool (RRT). Moody’s Analytics delivers updates to RRT’s reports as the regulation evolves, and all reports are fully auditable.

Advanced Risk Management

Integrated Business Reporting

Insurance risk professionals need clear reports that enable action. SII provides reports on RAROC, solvency ratio, balance sheet forecasts, and it also allows clients to build their own reports. Additionally, SII offers a set of analytical reports with slice, dice and drill down features across many dimensions, such as product/policy type, counterparty type, asset class, country, industry and user-defined criteria.

Client Behavior Modeling

SII enables firms to monitor the impact of voluntary deposits, lapse, renewal, mortality and other potential customer actions on the income statement and other indicators. Our solution also integrates advanced modeling techniques, including a multi-dimensional modeling of client behavior, and can also include renewals and new business in your simulations.

ALM : Better Manage the Asset Mix and Profit Sharing

In its advanced ALM engine, SII takes into consideration assets, liabilities and their interaction as a whole. Indeed, it dynamically computes the position of an insurer’s cash account by simulating asset and liability cash flows. Any surplus can be reinvested to change the asset mix according to a user’s specifications or using allocation rules such as matching duration or increasing equities proportion. In addition to this dynamic asset allocation, SII offers a flexible and versatile framework for profit sharing modeling in its ALM.

The Difference: Enterprise Risk Management

An End-To-End Solution

SII offers a complete end-to-end solution to manage insurance risk. From data gathering and storage to report generation, the technological framework allows firms to deal with sophisticated requirements while offering a robust and secure platform. The combination of technological sophistication, reliability, knowledge, experience and commitment of the SII team results in a unique solution. It makes achieving regulatory requirements easy while enhancing and streamlining business processes.

A Modular System on Scalable Technology

A key characteristic of the SII solution is its modularity: SII is one of many modules built on Moody’s Analytics robust Fermat Data Mart. This structure enables clients to leverage an initial investment in order to incrementally build robust enterprise risk management solution. The Fermat Data Mart, the SII’s core, was built to mirror business practices and is proven to handle large volumes of data. It provides a comprehensive data management and reporting platform with full auditability and compatibility with leading-edge calculation technologies. The Fermat Data Mart was designed to manage integrity and consistency controls on data, and it offers the ability to rapidly load source data, audit data quality, and reconcile source data with the General Ledger (GL).

Key Features

Breadth of Coverage

SII covers a range of instruments in which insurance companies invest. For these products, the solution provides built-in capabilities for cash flow generation and pricing using several methods (net present value, closed formula or monte carlo simulations). On the liability side, the solution covers products such as traditional life, protection insurance, savings, annuity and unit-linked. On the asset side, our solution includes a liability engine that models the products, generates the cash flows and performs pricing. The SII interface allows users to build new products from scratch, elaborate ratemaking and analyze current or future profitability.

Transparency

The SII data foundation, the Fermat Data Mart, and its calculation engines are built for openess. The SII database server is based on standard technology, which can be accessed from any authorized external application. The solution’s calculation engines are delivered with Application Programing Interfaces (APIs) that can be called from external scheduling tools as well as Moody’s Analytics Workflow, and it can interact with third-party components through multiple technologies. For complete compliance with internal models for regulatory purpose, or advanced modeling for specific business needs, the calculation engine offers a complete framework to manage user-designed code and functions.

Data Quality Management

The Fermat Data mart offers a full-featured data quality engine that uses pre-defined and customizable rules that check for integrity, coherence and validity. The solution offers GL reconciliation tools and provides the functionality to perform more than 4,000 quality check and error corrections. Additionally, integrity checks and constraints validate regulatory calculation data. Data that does not pass the checks are uploaded and flagged as erroneous. Edit screens enable error correction and deal recycling, and every manual change is traced for further audit. In all cases, a log file is generated and provides details on errors encountered for further analysis.

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