EIOPA Launches Study on Non-Life Underwriting Risk in Internal Models
EIOPA has launched a European-wide comparative study on non-life underwriting risk in internal models, also kicking-off of the data collection phase. The study is intended to analyze the relative positioning of non-life internal models and to provide a European perspective for their risk profile developments over the time horizon of five years. Therefore, this exercise covers internal model results from the Solvency II implementation in 2016 to the first annual submission in 2020, including the first COVID-19 impact assessment of the industry. The deadline for insurance undertakings to submit results to their national supervisory authority is September 15, 2021 while the deadline for national supervisory authorities to submit the information to EIOPA is October 15, 2021.
The sample of the Non-Life Underwriting Risk Comparative Study 2020, or NLCS 2020 study, covers insurers and reinsurers selected for participation and achieves a high coverage of undertakings using an internal model for non-life underwriting risk. The study will collect data with respect to the overall non-life underwriting risk and its decomposition at a European level. Furthermore, it will analyze, in depth, a number of selected lines of business to identify dominating factors for motor, fire, and general liability as well as credit and suretyship. The exercise will allow undertakings to report their view on risk while using a technically sound point of reference as provided by Solvency II. The design of the study is based on best practices from national competent authorities and includes informal feedback received through stakeholder outreach.
The study has reinforced the questions and answers process in the run-up of the exercise to improve communication channels between the study expectations and the undertakings’ submission of data. The study aims to understand aggregation consistently with respect to its quantitative dynamic. For this endeavor, it is necessary to understand the standalone risk from an internal view of risk—Internal Lines of Business (IntLoB) and Catastrophe Perils (Cat) perspective—as well as aggregation dynamics underlying it to arrive at the overall non-life underwriting risk (correlations and scenarios). To fairly compare diversification benefits, the study uses the Solvency II Lines of Business (S2LoB) granularity as starting point to arrive at the non-life underwriting risk. Undertakings also taking part in the comparative study on diversification must ensure a consistent submission of information as the information request has been developed jointly for both studies.
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Keywords: Europe, EU, Insurance, Underwriting Risk, Solvency II, Data Collection, Reporting, Internal Models, EIOPA
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