Mexico’s Road to Solvency II continued
■ ■ Final results and analysis were delivered to companies in
April 2010.
The quality of information obtained from insurance companies was an important concern in the process. Because many
companies don’t produce the structures necessary to run the
new models immediately, one of the most important considerations was the way in which the information is reported.
Another important concern was the type of information used in
the model: gross of reinsurance, net of reinsurance, accounting
figures, paid figures, past figures, etc. The first results obtained
for solvency capital requirements decreased 36 percent after
data quality was fully assessed by institutions.
The model’s final results show a 21 percent average increase
in current solvency requirements. But some companies had a
decrease in their requirements. These results correlate with
the 12 percent decrease in technical provisions. The average
Mexican;Association;of;insurance;
companies;(AMis)
National;college;of;Actuaries;
(coNAc)
Mexican;Association;of;Actuaries;
(AMA)
solvency index (measuring economic capital versus solvency
requirements) was 2. 51, which means that under this model,
no additional capital would be needed.
The results in reserves and capital requirements for long-term
life insurance are more favorable in companies with an internal
best-estimate calculus model. (This shows why it’s prudent for
companies to invest in the development of these models.)
Since January, AMIS has posted a book for its members on
the AMIS website (
www.amis.com.mx) detailing more about
the different methodologies developed in its risk capital determination model.
looking Beyond the Model
AMIS recognizes that Solvency II is more than a model, and it is
working to prepare the Mexican insurance sector for a success-
ful transition. Among its efforts, AMIS convened a panel of chief
economic officers of Mexican insurance companies
during its May 2010 National Insurers’ Convention.
The panel reached the following eight conclusions:
1. Even though Solvency II is an optimum framework
for the future, there’s no need to speed up the process.
It’s more advantageous to strengthen corporate gover-
nance and achieve better risk management practices.
2. Achieving equilibrium between industry growth
and regulatory requirements is fundamental.
3. It’s important that the Mexican standard model
resembles the European one as much as possible.
Mexico shouldn’t experiment with this.
4. Maintaining an insurance sector that’s attractive
for investors (foreign and local) will depend on how
Solvency II is implemented and on how capital requirements are balanced.
5. Clients will be affected as prices align to capital requirements. The benefit that clients receive through
the disclosure of solvency assumptions depends on
their insurance agents and/or assessors.
6. If Solvency II implementation becomes too complex and/or the process is accelerated, a market
concentration could develop.
7. It’s essential to establish comprehensive deadlines
to guarantee that the insurance sector is ready to operate under Solvency II. Change must be gradual.
8. Regulations shouldn’t pose an obstacle to sector
growth.
Insurers know that Solvency II will have a big impact on company culture, organizational structure,
and operational processes. The transition period will
be key. To determine an optimal period for the transition, AMIS asked insurers to estimate how much time
they needed to prepare for the arrival of Solvency II.
Respondents to the questionnaire represented 76 percent
of the market (based on direct premiums from 2009). Sixteen
companies had defined their views about Solvency II, with 12
of them considering the development of an internal model for
