We recently hosted a seminar, Solvency II (and Brexit) – Whatever next?, to discuss some of the challenges the actuarial function can expect to face over the next six months as we approach the end of the first year of Solvency II.
During the session, we also looked at the UK’s decision to leave the EU, exploring the changes expected during and after the leaving process, and how it may impact UK insurers. In this blog post, we share the key takeaways from the seminar.
"Firms should be ready to justify their approach, and shouldn’t be afraid to push back when challenged."
External audit of Solvency II disclosures
John Hoskin kicked off the seminar with a look at what companies should expect from the external audit process and how firms should prepare themselves (needless to say, documentation was mentioned!).
One area highlighted as a potential source of challenge from the auditors is the exercise of judgement. Ambiguity in the regulations and guidance can result in different interpretations; in such cases firms should be ready to justify their approach, and shouldn’t be afraid to push back when challenged. During this session John outlined potential strategies to help firms tackle this issue effectively.
Actuarial Function Report
While content, format and timing are all important factors when producing an Actuarial Function Report, John stressed that the overarching consideration should be the usefulness of the report – it can be easy to lose sight of this, instead seeing the report as a box-ticking exercise.
There’s no one-size-fits-all approach, but John provided some helpful ‘building blocks’ which can be used in its construction, with suggested approaches for different types of firm.
Opinions on underwriting and reinsurance
Cherry Chan then spoke about the requirement for the actuarial function to provide opinions on the overall underwriting policy and the adequacy of reinsurance arrangements.
Exactly what process firms are expected to follow in forming their opinion has been a source of some uncertainty. Cherry provided some much-needed guidance on the analysis which firms can perform in order to reach an opinion and what challenges they may face in the process.
We were delighted to welcome Geoffrey Maddock from law firm Herbert Smith Freehills, who joined us to discuss the legal and regulatory consequences following the EU referendum. Geoffrey highlighted that it may take a while for the post-Brexit landscape to become clear, and we can expect a period of market uncertainty until the UK’s future relationship with the EU is known.
Geoffrey outlined the legal process to be followed, including the anticipated difficulties in unravelling decades of inter-connected legislation, and explored potential post-Brexit arrangements between the UK and the EU. He also covered the options available for insurers looking to access the single market, including tools available for firms needing to restructure their business in light of the referendum result.
Please follow the link below to access the full presentation. If you would like more information on any of these topics, please contact Cherry Chan, John Hoskin or your normal Barnett Waddingham contact.