Regulation

Under the Solvency II directive, insurance companies are required to calculate their Solvency Capital Requirement (SCR) in order to prove to supervisors, policyholders and beneficiaries that they have a high enough level of funds to absorb significant losses and to make payments as they fall due. They have a choice between a standard formula and an internal model in calculating their SCR.

Many companies favour internal models as they are more risk-sensitive, capture individual risk profiles and therefore reduce the capital requirements placed on insurance companies by Solvency II. However, internal models are subject to approval by supervisory bodies. Insurance companies need to demonstrate that their internal model meets the use test, statistical quality standards, calibration standards, validation standards and documentation standards.

Internal Models and Solvency II is the first authoritative reference book on Solvency II internal models for practitioners and regulators, providing practical insight into these models and their frameworks.

Take a look at the Foreword and Introduction here.

“Each chapter has been written by experts in the topic, individuals with hands-on experience of designing, validating, reviewing and using models. They share their experience here, and bring alive the requirements of Solvency II through practical insight.”
From the foreword by Gabriel Bernardino, Chairman, European Insurance and Occupational Pensions Authority (EIOPA)

Following the global financial crisis, the Comprehensive Capital Analysis Review – CCAR – has emerged in the US as the most dominant regulatory regime to face banks in recent years: banks must be able to prove to regulators that they have sufficient capital to weather a severe economic downturn.

CCAR and Beyond is the first authoritative reference guide to CCAR, providing a complete introduction and analysis of the regulation from origins to implementation. Read the introduction to this handbook here.

With extensive experience advising CCAR banks on modelling issues, Jing Zhang brings together a cross-section of views from those directly involved in the regulation and implementation of these assessments and stress tests. CCAR and Beyond clarifies the various methodologies and techniques to approaching CCAR assessments, providing unique insight into this seminal regulation.

Stress Testing: Approaches, Methods and Applications explores and clarifies the methodology, impetus and functions of stress testing within the context of the latest practices and regulations faced by banks and other financial institutions.

The authoritative guide and reference tool for stress testing, this book is essential for risk managers, regulators and consultants who want a clearer understanding of the methods, tools and uses of stress testing in different risk areas.

The financial crisis that began in 2007 has led to a sea-change in the regulation of the banking and insurance sectors. The impact of the economic environment and the regulatory changes on financial institutions is unprecedented.  In response to the deficiencies in financial regulation revealed by this crisis, the Basel Committee on Banking Regulation set their global regulatory standards for banks in stone in the form of the Basel III guidelines, published in December 2010.

Insurance companies, which are increasingly regulated like banks, have been implementing the Solvency II Directive in Europe or its components in North America (which are considered parallel to the Basel guidelines). Both the banking and insurance sectors will be affected by Phase II of The International Financial Reporting Standard (IFRS), providing common ground between the two. Adapting to Basel III and the Financial Crisis presents an integrated view of these two industries, providing the reader with a comprehensive guide to the complexities of the new regulations while focusing on solutions rather than problems.