Invitation to participate in a ground-breaking syndicated study on governance and risk management under Solvency II

PRINT VERSION

Leading knowledge & insight on Pillar 2; exceptional value for money

According to Hector Sants,

"

Solvency II will deliver much stronger emphasis on risk management and forward-looking risk governance which will embed a stronger risk culture in firms, the development of enterprise risk management, and investment in the necessary skills to ensure a firm’s management truly understands its business model risks.

"

But how and what difference will it make in practice and performance for insurance firms?

While progress on Pillar 1 is well advanced, many firms have been slower to progress Pillar 2 requirements around governance, risk structures and frameworks and the management disciplines around creating and using the ORSA for economic capital assessment. But, just as in the Basel II regulatory framework for banking before it, Pillar 2 is where all the good stuff is – from which firms will potentially derive real improvements in management and firm performance and value, or where, if other firms do it better, they will progressively fall behind.

With EIOPA’s Level 3 guidance on the ORSA and governance fresh off the press or anticipated shortly respectively, now is the ideal time to take stock of your firm’s progress on Pillar 2 requirements and plans and to compare your knowledge and intended direction to other firms in the market. To make this achievable, we are undertaking a syndicated study – a study in which firms pay to participate – of firms’ intended responses to Pillar 2 requirements and their progress on developing and implementing those responses.

The study will contain four separate ‘themes’ of review and analysis, each of which will form a separate report:

1. The changing role of the board in Solvency II
2. Enterprise risk management and risk strategy
3. Behaviour and risk culture post-crisis
4. Supervision and being supervised under Solvency II

Within each of these topics, we will review

– what guidance tells us
– how firms have progressed their thinking and action in these behavioural and
  governance areas
– where they are hoping to get to
– how they perceive themselves getting there (including perceived impediments)
– how will they know when they have got there, and
– how they have judged where they are now
– what our knowledge of firm governance and behaviour tell us about firms’ and
  supervisors’ chances of success in their objectives in each of these areas or
  themes

Why us, why now?

As our recent research on both systemic risk (2010) and Solvency II (2011) demonstrates, Paradigm Risk specializes in grappling with analytically and behaviourally complex governance and risk issues from an innovative and insightful perspective. We will bring that same insight and expertise, as well as considerable practical exposure to Solvency II, to bear on these topics. Make no mistake; this stuff is complex. But, our mix of leading quantitative capability and qualitative research and advisory experience in firm and individual behaviour and organisational responses to regulation make us ideally suited to tackle these challenging topics rigorously and insightfully. To confirm this, just take a look at some of our previous research.

The thematic and firm-level research reports will form an invaluable complement to firms’ existing initiatives and validate progress and plans. Furthermore, each participating firm will also receive a report and briefing specifically on its progress relative to other firms which will consider any relevant differences in context or position. If it were available from other providers, this report would cost firms many tens of thousands of pounds. We believe our syndicated study represents exceptional value for money.

What is involved?

Beginning in December 2011, we anticipate conducting 8 to 10 interviews with governance and senior personnel in each participating firm and will also review governance processes, Solvency II programme plans and progress reporting. We will complete interviews by the end of February 2012 and will provide thematic reports to firms in the latter weeks of March. Initial reports and briefings to commissioning executives on comparative firm progress and status will be in late March and early April 2012, followed by broader presentations to firms’ boards and executives or another audience, as required by each participant.

To participate in this review will cost firms only £15,000 + VAT, of which half will be payable upon committing to participate. This cost represents a minute proportion of the cost of most firms’ Solvency II programmes but will contribute – potentially materially – to realising value from the firm’s investment in Solvency II.

While we will brief the regulator on our general findings only (without identifying participating firms), especially in relation to the supervision issues, the reports will not be available more broadly. By completing the review rigorously and sharing the results with the regulator/supervisor, we also hope to assist participating firms by making the supervisor’s approach better grounded in the realities of governance and management of risk at a firm level. This advocacy role may also prove very helpful to firms – yet another reason to participate in the syndicated study.

These landmark reports will assist participating firms – and only participating firms – to unlock the real value potential in Solvency II. ‘The numbers’, the actuarial and capital calculations, are critical to a firm’s financial position. But it is how a firm develops and uses those numbers – the practical behavioural and management issues insurance firms face in enhancing their risk governance and practice – that will ultimately determine whether Solvency II is a simply another regulatory burden or a catalyst for improvement in governance, decision-making, strategic planning and execution and long-term performance.

Please take a closer look at the detailed study proposal and contact us to discuss your interest in participating.

You can contact me directly at

peter.bonisch@paradigmrisk.com or at

mob. 07974 168 559 or
tel. 020 7060 7475

Peter Bonisch
Managing Director

If you'd like to find out more about the Solvency II governance and risk study, please contact us using this autocontact form or contact our Managing Director by phone, as follows:

Peter Bonisch
Managing Director, Paradigm Risk Limited

m. 07974 168 559
t. 020 7060 7475
e. email here