Most companies are underestimating the time needed to complete QIS5, this fall’s Quantitative Impact Study. The studies help fine-tune Solvency II by showing the, well, impact of proposals before they go into effect. It’s a tough, important job, but a lot of companies appear to be slow to realize how big it is.
The consultancy found that almost half (45%) of insurers operating in the UK believed that taking part in the dry run exercise for the Solvency II directive would take 100 person days or less. . . .
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Naren Persad, senior consultant at Towers Watson, said: “Insurers operating in the UK need to beware of significantly underestimating the time required for this exercise and we advise that they avoid leaving all the work until August.
“Given that a draft specification is already available, they should be conducting significant preparatory work ahead of the summer, in the order of 150 hours on average, with a particular focus on the availability of the necessary data and the alignment of the existing models with the QIS methodology. Organisations that leave all the work until August may see some cancelled summer holidays.”
Towers Watson’s research also found that more than half of insurance companies surveyed (57%) were cutting corners by planning an approximate approach to their QIS5 exercises.
The Towers press release that Insurance Times built upon adds these nuggets:
- “Insurers thought that determining the risk margin would be the most difficult aspect of the Solvency II balance sheet (30% said it was the most challenging area), followed closely by determining best estimate liability (29%) – challenges applicable to all insurers regardless of whether or not they are seeking internal model approval.
- “Regarding the Solvency II internal model validation process, 44% of insurers said that their current ICA process already combined independent internal validation and external validation.
- “Insurers thought that the internal model validation process would be much harder than the ICA, with 61% saying that the effort involved would be double or more relative to the ICA.”
I’m not the brightest bulb on Broadway, but I wouldn’t think determining best estimates would be that much of a challenge. In my experience, most companies know pretty well their redundancy or deficiency. Does S-II redefine best estimate?