1. Solvency II
A Practical Way of Delivery

2. Gain-Line & Solvency II
Solvency II is the biggest ever exercise in bringing together insurers and re-insurers under one
regulatory regime
• Solvency II is a set of principles and guidelines leading to best practice in risk management;
Solvency II Programme
• It is an Enterprise wide initiative that will impact all areas of the business;
• Early adopters are helping Lloyd’s and the FSA set the bar for what is required in the market;
• We can’t give you ‘The Answer’, but only a framework to help provide ‘An Answer’ based on decisions your
business need to make;
• Numerous approaches are being adopted across the market and it is not a case of ‘one size fits all’;
• Resources will be scarce and the deadline is unlikely to move;
• The range and diversity of insurance operations means that a Solvency II solution will vary from company to
company;
• The eventual solution in each case will require a detailed initial assessment and a range of inputs from a number
of different disciplines.
• The Gain-Line Consortium
• Gain-Line is a consortium of companies formed specifically to provide clients with focused Solvency II expertise
and resources;
• The details of the consortium members are contained within the Appendix.
Slide 2

3. Stakeholder Requirements
There are many stakeholders with differing priorities that need to be integral to the Solvency II
Programme
Solvency II Programme
Key Objectives:-
CA CIO Chief Actuary – centralised and consistent modelling approach for all
actuarial users for realistic ‘what-if’ and scenario planning;
CEO
Chief Risk Officer – enterprise wide consistent risk management standards
and transparent risk modelling approach;
Chief Information Officer – robust IT governance with scalable modelling
CRO CFO tools and techniques, with consistent approach to data controls and
architecture;
Chief Financial Officer – faster reporting timetable with consistent approach to financial and management
information;
Chief Executive Officer – enhanced business performance through risk based decision making and efficient
allocation of capital.
Slide 3

4. Solvency II Components
Programmes will be challenged to align a variety of different functions as Solvency II will impact all
elements of the Business
Governance & Oversight
Governance,
Compliance & Comms Documentation, Comms & Training
External Reporting
Standard Formula
Solvency II Programme
(including Programme Office)
Balance Sheet & Portfolio Management
Portfolio
Management Calculation Kernel
Technical Provisions
Assets & Asset Liability Management
Internal Model/Risk Management
Risk Management
ORSA & the 6 Tests
Data Quality & Governance
Systems &
Solvency II Data Repository
Data
Slide 4 IT Systems & Processes

5. ERM under Solvency II
Key Solvency II Principles
• Clear responsibility at senior level for risk management ensuring its use in managing the business, including
Solvency II Programme
influence on key decisions;
• Full integration of risk and capital management – must be embedded sufficiently to pass the Use Test;
• The ORSA is an integral part of managing the business against the chosen strategy and strategic decision
making;
• Risk appetite is clearly articulated and widely understood as the parameters to manage the business –
changes are proactive and based upon the risk and capital framework;
• The risk and capital framework is clearly documented and evidenced in advance of its use.
Slide 5

6. The Risk Management Framework
ERM Framework Elements “Systemic” / Interdependent Risk Scenario Analysis
Contingency Planning
- Operational
Governance Governance E.g.: - Market changing events
• Accountability Risks & Controls Financial markets risk
- 1st line: Line Management
Review & Assurance Currency fluctuations Emerging Risk Management
- 2nd line: Review & Challenge
- 3rd line: Independent assurance /
Quantification Market changing events Linkage to Strategy
challenge
• Structure
• Decision making (inc. Delegation)
Risks & Controls
• Identification & Assessment Regulatory Risk
• Systems & controls i.e.: Governance
• Policy and approach Risks & Controls & Capital Risk
• Core processes & systems Group
Review & Assurance
• Risk appetite set Governance
Risks & Controls
Liquidity Risk
Review & Assurance Quantification
• MI / KPI’s
Review & Assurance
Governance Regularly Disclosure
Quantification Operational Risk updated,
• Scenario analysis & stress testing Risks & Controls
• Review & challenge
• Independent assurance
Review & Assurance
Governance clearly &
Risks & Controls
Quantification
Market Risk
Quantification Assurance
Review &
documented Reporting
• Base Level (solvency / regulatory) Governance
• Economic Risks & Controls
Quantification
• Stress testing / tolerance levels Credit Risk
Review & Assurance
• Continually refined risk appetite Governance
Risks & Controls
Quantification
Insurance
Review & Assurance
Risk
Governance
Risks & Controls
Quantification
Review & Assurance
Quantification
Pillar 1 Pillar 2 Pillar 3
MCR, SCR Capital Model etc ORSA & Supervisory Review Disclosure & Market Discipline
Slide 6

7. Project QA & Review
In our experience, it is often prudent to perform an independent programme/project assurance
review to ensure the programme/project is still on target to deliver
The main areas of the review are as follows:- II Programme
Solvency
• How the programme/project is being undertaken?
– We will review whether your programme/project is being appropriately and effectively governed
and managed.
• What the programme/project is doing?
– We will review the scope and approach across the programme/project to ensure that they are
appropriate and aligned with the direction of the market and our interpretation of the Directive.
The key objectives of this programme/project review will be to:-
• Comment on and challenge the strategic decisions and approaches being taken within the programme/project;
• Identify where there are weaknesses in, and improvement opportunities for, the overall programme/project;
• Provide advice and recommendations on how to remedy problems and make improvements.
Slide 7

8. Project QA & Review Approach
The approach is defined in two, distinct phases
Phase I – Initial Analysis Phase (1-2 weeks dependent upon the size and complexity of the programme/project)
Solvency II Programme
• Desk based review of the programme/project documentation and face-to-face interviews with the key
members of the programme/project. The focus will be on the overall programme/project, particularly
the scope and approach to structure and resourcing. At the end of this stage, the initial observations
will be discussed with your key programme/project members and highlight areas where we think
improvements or changes may be required. Deliverable : Initial Findings Report
Phase II – Review and Challenge Phase (2-6 weeks dependent upon the size and complexity of the programme/project)
• Based on Phase I, we will sit down with the key members of your programme/project and agree specific
areas where we believe Phase II should be focused. We will jointly decide whether we continue on a
more generic review or whether to focus in on some specific areas. During this Phase, we will interview
workstream leads and hold workshops to get a better understanding of the approach the
programme/project is taking. Where we identify specific areas where improvements could be made, we
will refer to our existing network of Solvency II experts to ensure best practice is being adhered to.
Deliverable : Detailed Recommendations Report
Slide 8

9. The Gain-line Consortium
Member Companies

10. Magellan Consultancy Services
Magellan are an independent management consultancy focussing on programme management and
project delivery
Magellan’s Proposition is based on deep Project & Programme Management skills within this
sector:-
• Specific Insurance experience (client references are available);
• Extensive Project & Programme Management experience within this environment with the
Management Team coming from Big-4 consultancies and senior operational roles within industry;
• A wide range of programme services, including strategy definition, project and programme
management, project delivery and QA;
• An innovative approach to delivering programme services;
• A collaborative approach to project delivery which has delivered in excess of £30m of savings in the
programmes we have worked on with our clients.
Phase 0 Phase 1 Phase 2 Phase 3 Phase 4
'Discovery' 'Initiation' 'Analysis' 'Implementation' 'Realisation'
Initial Feasibility Planning and Definition Detailed Planning and 'Go-Live' and Roll-out Benefits Realisation
Design and Review
High Level Planning Initial Implementation Planning Detailed mplementation Planning Detailed Training Plans Benefits Realisation Plan
Initial Cost Benefit Analysis Stage 1 Business Case Stage 2 Business Case Roll-out Strategy Post Implementation Review
Recommendation Report Operational Review 'To-Be' Operational Design Benefits Tracking
Initial Process Analysis Process Review Define Controls and Checks Implement 'To-Be' Processess
BAU Handover
High Level Process Documentation Project Initiation Document
Future Training Plans
Risks, Assumptions, Issues, Dependencies
Operational Risk Assessments
High Level Operational Risk Assessment Detailed Operational Risk Assessment
Initial Technical Review Technical Requirements Detailed Systems Design Testing and Roll-Out Technology Strategy
Techni cal Requirements Document Techni cal Design Document Testing Strategy Define Technical Strategy
Define Technical Specifications Systems Pilot Review Systems Performance
Define Workflow Requirements
Define Systems Interfaces Implement Final Solution
Review Organisation Structures Organisational Review 'To-Be' Organisational Design People Strategy
Analyse FTE numbers Define Roles and Resposibilities Recruit/Re-organise Key Staff People Strategy
Review Staff Locations Communications Plan and Execution Ongoing Review of Structure
High Level Staff/Union Consultations Detailed Staff/Union Consultations
Supplier Selection / Evaluation Define Contractuals Service Level Agreements Supplier Review Strategy
Initial Supplier Review Detailed Supplier Analysis Supplier Due Diligence Agree Service Levels Supplier Review Forum
Reference Site Visits Create Contractual Framework Define MI Requirements Agree Escalation Routes
Agree Terms and Conditions Business Continuity Planning
Slide 10

11. JMR
JMR are an independent software services and solutions company that has been providing quality
technical resource for 20 years
JMR’s Proposition is based on the provision of experienced technical resource who have skills
within this sector:-
• Specific Insurance experience (client references are available);
• Extensive analysis, design and modelling skills within this environment having delivered individual
assignments and fixed price projects for data migration;
• A strong network of associates that that can join a team to deliver specific assignments;
• Willing to work on flexible commercial models;
• A collaborative approach to project delivery with a ‘can do’ attitude;
• A strong focus on clients requirements and delivery.
Slide 11

12. Hillway Consulting
Hillway Consulting is an independent organisation focusing on operational and management issues
in the London insurance market
Hillway Consulting has:-
• Over 30 years experience in the London Insurance market;
• Operational and management experience in both active and run-off environments with particular
knowledge of underwriting, claims and reinsurance operations;
• Experience at Board Level in regulated environments and in working with regulators;
• Excellent network and contacts within the UK and overseas;
• First hand experience of capital markets, risk and capital modelling;
• Experience in corporate formations, restructuring and M&A in both the direct and reinsurance
markets.
Slide 12

13. CirclePeople
Circle People are a boutique executive search firm operating across the FS Risk Management
community
Summary
• Key sectors; Insurance, Retail Banking, Investment Banking and Big 4 Consulting and Strategy;
• Market discipline; Credit, Market and Operational Risk, Solvency II, Liquidity & Capital Management,
Basel II, Economic Capital, Quantitative and Risk Strategy;
• We typically place Senior Managers, Directors, Programme Directors & Managers, Head’s of and
Project Managers;
• We operate a search methodology whether working contingently or retained supported by a
dedicated research function providing detailed market mapping and ensuring we stay in regular contact
with our candidate community/key people.
Slide 13

14. End of Presentation