Insurance companies are facing major challenges due to changes in the rules of the European insurance supervision system known as “Solvency II” that EU member states are expected to implement by the beginning of 2013. This fundamental reform of insurance supervision law is expected to lead to higher capital requirements for many companies.
During financial year 2009, the Managing Board of Vienna Insurance Group established a Group-wide project, managed centrally from Austria, to implement Solvency II at the individual company and Group levels. Group guidelines and methods are being prepared in the Group and implemented locally in the Group companies to ensure consistent and timely realisation of the project. Based on current requirements and the latest QIS findings, VIG is prepared at the Group and individual company levels for the increased capital requirements under Solvency II.
Intensive work on the development and implementation of a partial internal model is continuing at both the Group and individual company levels as part of the Solvency II project. Care is being taken to ensure that the necessary calculation models and processes are set up in the Group companies, so that consistent values can be calculated at both the individual company level and the Group level. Extensive test runs are currently being performed throughout the Group to help with this process. Intensive coordination discussions are currently taking place with the supervisory authorities concerning Solvency II in order to ensure approval of the partial internal model when Solvency II enters into force.
With respect to future qualitative risk management requirements, Vienna Insurance Group is establishing a uniform governance system appropriate for Solvency II that includes all necessary functions (risk management, compliance, actuarial function, internal auditing) and clearly defines responsibilities and processes. Another goal is to implement uniform Group standards and methods for risk inventories and own risk and solvency assessment (ORSA). This will help with the development of a consistent and comprehensive Group risk reporting system that allows better assessment and management of the risk situation of the Group. A Group-wide internal control system ensures compliance with the guidelines and requirements produced by the risk management system.