The changes to the European insurance supervisory system referred to as Solvency II that are to be implemented by all member states of the EU present great challenges for insurance companies. Uncertainty about the actual effective date and final detailed formulation of Solvency II makes it necessary for companies to provide a great deal of flexibility in their implementation plans. In addition, based on the current situation, this fundamental reform of insurance supervision law is expected to lead to higher capital requirements for many companies.
In order to satisfy the extensive requirements resulting from Solvency II, in financial year 2009 the Vienna Insurance Group Managing Board 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 developed in the Group and implemented locally in Group companies in order to ensure consistent and timely implementation of Solvency II at the individual company and Group levels. In addition, the involvement of expert groups from the individual companies promotes the exchange of knowledge and experience and full acceptance of these guidelines within the Group as a whole. Based on current regulatory requirements and the analyses and test calculations that have been performed, VIG is well prepared for Solvency II at both the Group and individual company levels.
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 Group level. Regular consultations are being held with supervisory authorities in the individual VIG countries in order to ensure approval of the partial internal model when Solvency II comes into effect.
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 key functions and clearly defines responsibilities and processes. In addition, Group-wide uniform standards and methods for risk inventory and the Own Risk and Solvency Assessment (ORSA) were developed and checked using test runs at the local and Group levels. A Group-wide internal control system ensures compliance with the guidelines and requirements resulting from the risk management system.
While the focus in 2012 was on actual development and implementation of the models and processes, in 2013 the focus is on further fine-tuning and harmonisation of functional and technical calculation and reporting processes, and preparations for the approval procedure with supervisory authorities for the partial internal model.