Solvency II : Data Framework

Management Craig R. Taylor

15 May 2013 London

V1.1

1

Introduction

Looking to cover off the complexities on data and their impact on Pillar II and Pillar III

Looking at ◦ Complexity ◦ Manual intervention ◦ Controls ◦ The unknown ◦ Use and efficiency around use ◦ Basic rules

2

Introduction

Data commonly poorly recorded, poorly defined, inconsistently used

chance, sorry need, to get it right

not just data in but data out

make x1, x2, x3 into X

3

4

5

Best estimate reserving

output

Risk margin output

Aon Benfield RMS CAT Modelling

Risk Register

Technical provisions Asset mix Underwriting

RiskBusiness planning

CAT model outputs

Operational Risk

Economic Scenario

GeneratorR/I Process

Solvency Capital

Requirement ("SCR")

Forecasted Accounts for

Business PlanLiability Profile

Statutory reporting

Management information

ORSA

Model use

Calculation Kernel

Distribution of Projected Future Cashflows

Outside Model Scope

Model Inputs

Model Calculations

Model Outputs

Asset Data Delivery Q4-’11 and Q4-’12

6

ART Activities

ECAPS2 Activities

BU files +

Bloomberg

Scrubbing Cleaned files

In Landing Zone

DDS RDM

ECAPS Specific

Functionality

Position File +

Instrument Files

FI Bucketing +

FI Domesticity +

Position Filtering

Position File +

Instrument Files

Equity Basket Options

Equity Index

Futures

ECAPS Delivery

Pandora File Creation (Algorithmics IFF)

GMDB Position File

+ Instrument Files

KDI Check +

Dashboard

Bucketing Mapping Tables

GAUDI Reconciliation

FI-DC

Position File FI-FRB FI-FRN FI-DC EBO EIF

Asset Data Delivery – Suggested Approach Q2 2013

7

ART Activities

ECAPS2 Activities

BU files +

Bloomberg

Scrubbing Cleaned files

In Landing Zone

DDS RDM

ECAPS Delivery

Pandora Pre Processing (KDI Extraction)

Position File +

Instrument KDI Files

KDI Check +

Dashboard

Bucketing Mapping Tables

GAUDI Reconcilliation

FI-DC EBO-Indices

ETL (Pandorra)

ETL (QlikView Expressor)

Asset Data Delivery – Suggested Approach Q3 2013

8

ART Activities

ECAPS2 Activities

BU files +

Bloomberg

Scrubbing Cleaned files

In Landing Zone

DDS RDM

ECAPS Delivery

Position File +

Instrument Files

KDI Check +

Dashboard

Bucketing Mapping Tables

GAUDI Reconcilliation

FI-DC EBO-Indices

ETL (QlikView Expressor)

What does the framework look like?

Source Use Report

9

QU

ALITY

QU

ALITY

QU

ALITY

QU

ALITY

What does it look like? 10

Plans & Strategies

Risk Analysis

External Impacts

Assessment &

Decisions

Outcome

Outcome

Outcome

OCU POINTS

20

30

20 30

The unknown?

ORSA documents all risks across Pillar I-III

Pillar II & III risks non-numerate

Strategy, Emerging, Compliance, Concentration, Reputation risks

Difficult to estimate, little peer or historic comparison

Based on opinion

11

How is the ORSA used?

ensures understanding of risk

demonstrates understanding of risk to senior management

demonstrate understanding of risk and embedded Solvency II processes to the regulator

adherence to process ensures monitoring & feedback loop

should ultimately be full iterative cycle of decisions into next ORSA

should be regarded as a hop, step and jump rather than long jump

12

Numbers and text

log of elements ... Log of use

reference to reports, documentation

re-use

ensure qualitative balance correct .. Only what’s needed

central submission tool

13

Who in the business uses it?

truly everyone

circulate set and record all

segmentation and one definition are key

re-use and reduce extracts and results

plan, re-organise business calendar for moveable processes

reduce effort, reduce re-do, increase control, reduce x1,x2,x3,...

14

Who in the business uses it?

reports should cascade up and down to the ORSA, mid-ORSA reports should report on deviation to the ORSA (to ensure understood)

Link into BAU management process at many levels ... not just senior level

all should understand it’s use but don’t need to understand it all ... ensure use is defined to level needed

15

When is it right?

never

over next couple of years will be continued improvement of definition by regulators (as they learn), self as you learn

ensure record of use records positive and negative use ... don’t produce what isn’t needed and ensure if not used then truly not needed

16

Pragmatic solution for data

many options

integration

ease of use and re-use

don’t over engineer .. Needs to be workable\usable

set tool/approach suitable for scale of company, data, systems etc

simpler is better

17

THANK YOU !! 18