Tuesday 10 April 2012

Central Bank of Ireland - Solvency Matters newsletter, ORSA and models

The Central Bank of Ireland have released their latest Solvency II briefing letter (thanks to Mike Claffey for tweeting it).

Important to note the following from a UK and Ireland practitioner's perspective, on the premise that the two regulatory bodies in the UK and Ireland are setting the benchmarks in many respects;
  • 'No panic' message given regarding the Omnibus II 'delays' - timetable unchanged in this regard
  • No references to the Commission's draft Level 2 text as a basis for undertakings to use for internal model application activity (which the FSA went out of their way to advocate at their February IMAP event). Is there a legitimate reason for this, bearing in mind how useful the document is for applicants in ensuring their documentation addresses the final requirements, even if only 'there or there abouts'?
  • Model applicants should be "well advanced with the technical aspects of their model build" - this is somewhat to the FSA's take, which was that build should be pretty much complete by now (p10)
  • Some nice visceral examples of Use Test evidence requirements from undertakings, particularly around evidencing Board 'understanding' of the model - I would add that these seem onerous for NEDs, but reasonable for executives, so I would be interested to see how this is applied (could you for example see your non-industry, non-executive director justifying diversification benefits to your friendly local regulator? Is that a reasonable use of project resource/Board training time?)
  • Board members will be interviewed by the CBoI individually "without the support of their technical experts" - I'll get my coat then...
  • On ORSA, they "recognise that individual undertakings would like to get more details on specifics of the ORSA Reporting Process", but want undertakings to focus on the contributing processes themselves - easier said than done, particularly when even EIOPA had to relent from the mantra of 'ORSA is process, not a report' when they got to public consultation stage!
I'm sure that the industry will appreciate some of the clarity in here - they may appreciate the Commission's Level 2 draft a bit more though!

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