Advice on design & drafting of legislation & regulations
A regulator may need to introduce changes or new regulations to meet changing market needs. We assist the regulator in defining clearly the objectives of regulations and advise on the technical content needed to achieve those objectives.
Review of legislation and regulations
Regulatory structures require review to ensure they remain relevant to a changing environment. There may be product lines or market developments that are not adequately covered by the existing regulations. Alternatively, there may be international developments that are valuable in formulating revised regulations.
We consider an area of regulation - or a whole regulatory structure - and advise where enhancement may be appropriate.
Review of licence applications
A company intending to transact regulated business will need to apply for a licence. We advise on whether applications demonstrate that business will be conducted in a prudent manner and that the applicant has appropriate financial and non-financial resources.
Our advice is likely to include assessing business plans, capital and liquidity, as well as governance, risk management and controls. We advise on market impact and wider regulatory issues arising from the granting of new licences.
Review of business plans of regulated entities
A company may be required to submit a business plan to its regulator, for example as a result of business growth, whether planned or not, or to obtain authorisation for entry into new classes of business, or possibly into new geographic regions. Alternatively, the requirement may be the result of poor trading results leading to impairment of existing capital.
We examine the credibility of plans submitted and the impact of the company’s plans on its projected capital position.
Review of insurance company prudential returns
Insurance and reinsurance companies must demonstrate that business is conducted in a prudent manner and that they have appropriate financial resources. One tool for achieving this is the submission to the regulator of, typically annual, prudential returns. Returns provide detailed numerical information on the business being written and upon the assets held to back that business. A key component of prudential returns is an actuarial report on the adequacy of the company’s technical reserves.
We provide detailed scrutiny of prudential returns and the associated actuarial valuation report. We audit compliance with the relevant law and regulations, examine key indicators and provide our opinions on the methodologies used in determining the technical reserves of the company.
Review of insurance company pricing reports
In many markets there is a concern that particular classes of business are systematically mispriced by insurers. This can be a particular issue in respect of classes where high volumes of business written at inadequate rates can threaten the stability of the insurance industry.
Regulators can respond by requiring premium rates to be supported by an actuarial pricing report. We provide regulators with an analysis of such reports.
Review of insurance policy terms and conditions
An insurance policy should deliver the cover that a policyholder might reasonably expect. At the same time, it should not expose the insurer to risks it cannot sustain. Some regulators require pre-approval of new products. Others may wish to conduct a thematic review of a class of business.
We review insurance documentation with a view to ensuring that insurers are acting prudently and that customers are being treated fairly.
Review of reinsurance protection
It is vital that companies maintain adequate reinsurance protection and conform to the requirements of regulations in this respect. It is therefore necessary to review reinsurance arrangements to ensure that they are adequate and compliant.
We provide regulators with an analysis of the adequacy and security of a company’s reinsurance protection.
Review of insurance company investment strategies
We consider the investment policy of a company, and its implementation, to ensure that it is appropriately prudent and that it complies with regulations. In particular, we examine the asset classes supporting the various classes of business being written, or proposed to be written, with regard to the nature, quality, diversity, currency and duration of those assets.
Participation in regulator inspection visits to
-- regulated entities
Our consultants can provide on-site technical support during regulator visits to companies.
Advice on insurance market mergers and acquisitions
When mergers and acquisitions are proposed in the insurance market, our main technical focus is on future solvency. We seek to establish whether the proposed new company is likely to be able to maintain its solvency margins in the medium term. In addition, where significant staff changes are projected, we investigate whether the company is likely to retain enough expertise to ensure the continued operation of the lines of business involved.
We can also consider the estimated market share of the proposed new company in various classes of business and advise if there is likely to be any detriment to consumers due to the size of the transaction.
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