Andrew Mitchell, Managing Director of Willis Analytics Catastrophe Management Services and Ben Chadwick, Executive Director and Lead Analyst for Willis Re’s Non-Marine Retrocession and London Market business unit, represented Willis Re on the task force.
Mitchell commented: “These guidelines appear to be the first instance of any financial services sector working collectively to understand how best to manage modelling processes and model methodologies. This is also the first time in the 20 years of cat modelling history that a definitive consensus approach has been established by its leading practitioners.”
The ABI, with the Financial Services Authority advising on policy, brought together experts from across the re/insurance industry to create the market task force which transformed nearly 500 pages of abstract legislation into a 68-page set of practical guidelines for the implementation of catastrophe modelling under Solvency II regulations. Although the guidelines have been produced with UK insurers in mind, the taskforce anticipates they will have a global influence on how regulators and markets approach the use of cat models.
In response to the publication of the ABI guidelines, Willis Re prepared a summary of what the report will mean for its clients.
It is possible that some will view the recommendations of the report as yet another regulatory burden, but Mitchell urges the industry to remember that the guidelines do not introduce anything additional.
“Through the framework of Solvency II and similar legislation, regulators worldwide are starting to scrutinise catastrophe modelling and models,” said Mitchell. “The task force and the guidelines have not added any extra requirements for modelling beyond what is already present in the Solvency II legislation; rather, these guidelines bring clarity and objectivity to what was abstract policy, and will assist our clients in the activities necessary to prepare for solvency submissions to regulators.”
David Simmons, Managing Director of the Willis Re Enterprise Risk Management practice, welcomed the ABI’s paper and commented on Willis’ position, saying: “Willis is well-positioned to help our clients meet the additional challenges of Solvency II regulation with the minimum of pain. Willis has a policy of positive engagement with regulators, through channels such as industry task forces and expert groups, making sure that our clients’ concerns are heard and, as far as practically possible, interests protected. We will continue to watch for our clients’ interests as this initiative gains currency throughout Europe and welcome the opportunity to contribute to the clarification of existing policy.”