Generating Cash in a Volatile Solvency II World
From the Oliver Wyman website:
Cash has been fundamental to the re-rating that the European insurance sector has enjoyed in recent years. We believe that the introduction of Solvency II when it comes into effect on 1 January 2016 presents a threat to this success story. Available capital post Solvency II becomes significantly more volatile and the way cash is disclosed today needs to change. In this joint report with Morgan Stanley, we explore further in a Solvency II world, how the value-in-force becomes an integral part of own funds and recommend strategies for insurers in managing the volatility this creates.
Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].
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Table of Contents
How the focus on cash has paid off for European insurers
Beyond “free surplus” as a cash measure
How the market currently thinks about cash flow for insurers
What changes post Solvency II?
Traditional measures and capital drag
Managing capital in a more volatile solvency regime
A new lens for disclosing cashflow post Solvency II
Attributes of winners and losers
Appendix I: Various required capital definitions
Appendix II; Solvency Capital Requirement (SCR) Composition
Appendix III: Glossary of terms