The proposed requirements seek to retain a number of elements of the existing regime, in particular some of the requirements introduced only last May for reinsurers and non-life insurers, and in addition to apply these to life insurers. These include that the Head of Actuarial Function (HoAF) provides, regarding the technical provisions, an annual actuarial opinion to the Central Bank and an annual report to the board. Interestingly the annual report to the board is only required to be presented within 2 months of the actuarial opinion’s submission to the Central Bank, a strange order of priority given the supposed pre-eminent responsibility of the board under Solvency II. Also a bit strange is that the HoAF will be required to provide an actuarial opinion to the board regarding the range of risks and the adequacy of the scenarios considered as part of each ORSA process as this seems to encroach upon the role of the Risk Function.
Other proposed requirements include that undertakings shall establish a written reserving policy and that high impact firms shall establish a reserving committee. In addition all high, medium high and medium low impact firms will be required to engage periodically (every 2, 3 or 5 years respectively) a reviewing actuary to conduct a peer review of the technical provisions and the related actuarial opinion and actuarial reports. These were all part of the recently introduced reserving requirements for non-life insurers and reinsurers but will now also be applied to life insurers for the first time.
What seems to be emerging is that different member states will be taking different approaches regarding the formal actuarial sign off of technical provisions, with some regulators requiring it and others not. The UK has decided not to require it, putting all the responsibility on the board, whereas the Irish Central Bank appears to be opting for a formal relationship with the HoAF. This may be because it is under resource pressure and everything that can strengthen the control process will be employed. On the other hand it does suggest that significant differences are already emerging in how Solvency II will be applied in different states and some observers fear that the hard won harmonisation that has been introduced will begin to weaken after the regime goes live in 2016.
Submissions on the Consultation Paper may be made to the Central Bank up to 29th May 2015.