Downwards counterfactual analysis

Stress and scenario testing are important risk assessment tools.¬† They also provide useful ways to prepare in advance for adverse scenarios so that management doesn’t have to create everything from first principles when something similar occurs. But trying to imagine scenarios, particularly very severe scenarios, isn’t straightforward. We don’t have many examples of very extreme […]

Move over cholera, here’s the Black Death

The Black Death, caused by the bacterium¬†Yersinia pestis, wiped out 30 to 50 percent of Europe’s population between 1347 and 1351 Now, South Africa has been placed on high alert for a potential plague infection. Mortality rates are estimated anywhere between 30% and 100% without treatment. Many estimates are towards the top end of this […]

Argentina teetering towards default

I’ve been working with a few insurers and reinsurers on credit risk recently. We’ve had plenty of reasons to think about it, what with new regulations (SAM, Basel III) and South African government downgrades. However, sometimes I get the impression that credit risk is viewed as an academic risk, as something that happens to others, […]

The Perfect Storm Part 1 – IFRS reporting under SAM

A client recently mentioned that they were concerned about the implication that the adoption of Solvency Assessment and Management (SAM) would have on insurance accounting under current IFRS4. The apparent concern was that measurement of policyholder liabilities for IFRS reporting would change to follow SAM automatically. Let me start out by saying this is categorically […]

The Perfect Storm – Part 0

The world of financial reporting for insurers has never been this close to the edge. There is more change brewing now even than when Europe adopted “European Embedded Values” and later “Market Consistent Embedded Values”. The irony is that Embedded Values may well fall away as a result of the latest change. So what is […]

SAM Risk-free Rate Workshop

The Technical Provisions Task Group and KPMG ran a workshop for industry participation on risk-free rates recently. The idea was to see whether we could improve the extent and quality of industry comment on key, controversial areas of the proposed SAM regime. Turnout was good, but not great, but the discussion and points raised were […]

Kings, constitution and SAM legislation

I haven’t posted in ages – plenty happening on the work front, which is mostly good news. I also don’t really have time to comment properly on this article but Wits academic, Robert Vivian, but it’s interesting reading all the same. Read Vivian’s letter first and then come back to my comments. I can’t help […]

Summary of SAM Interim Measures

A client was asking about the key changes coming up for SAM Interim Measures. This document (from the FSB) is about the best summary I’ve seen:¬†Interim Measures Update (Governance) My take on this is that the FSB is basically expecting compliance or a pretty concerted effort and reasonable compliance with these requirements NOW. The original […]