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 the final detailed formulation of Solvency II made it especially important for companies to provide a high deal of flexibility in their implementation plans.

Based on developments and activities at the European and national levels, Solvency II can be expected to enter into force at the beginning of 2016. The European insurance supervisory authority EIOPA published interim measures at the end of 2013, and requested that all EU national supervisory authorities submit a comply-or-explain report for the requirements in the interim measures. In addition, a draft of the Level 2 implementation measures – “Delegated Acts on Solvency II” – was presented at the beginning of 2014 for evaluation.

Based on this, most EU member states also took decisive steps to ensure that Solvency II will enter into force at the beginning of 2016. The small amendment to the Austrian Insurance Supervision Act (VAG) that is expected to enter into force on 1 July 2014 in Austria refers in detail to the EIOPA interim measures that specify requirements for the core areas of Solvency II and concern the following points:

  • The governance system
  • Reporting with national supervisory authorities
  • Forward looking assessment of own risks (FLAOR) in preparation for the Own Risk and Solvency Assessment (ORSA) under Solvency II
  • The approval of (partial) internal models under Solvency II

VIG is well prepared to fulfil the extensive requirements placed on the Company by Solvency II starting in 2016 and the VAG amendment starting in the middle of 2014. The Group-wide “Solvency II” project that began in financial year 2009 and is centrally managed from Austria follows legal developments in detail and promptly implements needed measures in order to ensure consistent, timely implementation of Solvency II and the interim measures at both the Group and individual company level.

Standardised guidelines, calculation and reporting solutions and advanced risk management processes were developed and implemented with the assistance of experts from the Group companies. The adjustments needed based on the recently published changes to calculation methods and reporting information in the latest draft were analysed and are currently being implemented in the systems.

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. The calculation procedures have been established in the individual companies and the required know-how is available there to allow consistent management parameters to be determined both at the Group and individual company levels. 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 ORSA were developed and successfully introduced at the Group and local levels in the year just ended. A Group-wide unified internal control system ensures compliance with the guidelines and requirements resulting from the risk management system.

This Group-wide approach with intensive involvement of the local companies promotes the exchange of knowledge and experience and full acceptance of the guidelines and processes within VIG as a whole, so that based on the current regulatory requirements and the analyses and test calculations that have been performed, VIG is well prepared for the qualitative and quantitative requirements of Solvency II at both the Group and individual company levels.

Outlook 2014

Aside from further preparations for the approval procedure for VIG's partial internal model, the main focus of the Solvency II preparations in 2014 is on fulfilling the requirements of EIOPA's interim measures and the European Commission's Delegated Acts – Solvency II, which are currently in the draft stage, and related functional and technical adjustments to calculation and reporting processes.