Own Risk And Solvency Assessment And Dynamic Solvency Test

The European solvency II agreement and the new Mexican insurance and surety regulation require institutions to periodically conduct an Own Risk and Solvency Assessment. In Mexico this assessment includes the Dynamic Solvency Test (DST).

The ORSA should be an integral part of the business management, providing a holistic view of the risks that affect an institution, contributing with quality information for strategic decisions and optimal use of capital. On the other hand, the ORSA allows institutions to know their total solvency needs according to their business goals.

The DST is an exercise required in the Mexican regulation that has the purpose of assessing the sufficiency of the institution’s own funds to meet the solvency capital requirement (SCR) in several prospective scenarios of its operation.

Numeravi offers consultancy services to convert the ORSA and the DST into instruments to optimize the use of capital of insurance and surety institutions, by estimating their real solvency level and own funds requirements based on their business goals and risk exposure. With Numeravi’s consultancy institutions will achieve:

Own Risk and Solvency Assessment

  • Determine how appropriate for the institution are the models to measure risk exposure used to calculate the SCR.
  • Assess the effects that various risk stress scenarios may have on the institution, as well as evaluate the solvency margin in each one.
  • Evaluate compliance with the regulation on risk management established in the LISF and in the CUSF, as well as the objectives, limits, policies, processes and procedures of the institution.
  • Evaluate compliance with the regulation on investments, technical provisions, reinsurance, guarantees, SCR and minimum capital requirement.
  • Design and propose the best alternatives to address the opportunity areas detected.

Dynamic Solvency Test

  • To know how the variables that determine the SCR act, to identify the areas (insurance lines or risk types) that generate the greatest exposure to losses, and therefore, increases the SCR.
  • In case of surety institutions, assess their solvency by considering both surety insurance and bonds.
  • Identify specific risks that may affect their satisfactory financial condition.
  • Propose actions to reduce exposure to the main risks.
  • Design actions that mitigate adverse effects if such risks materialize.
  • Comply efficiently with regulation.

In Numeravi we have the technology, knowledge and expertise necessary to:

  • assess how suitable the SCR statutory methodology is for each institution;
  • build scenarios that fit the business nature of each company;

which allow obtaining useful information to optimize the use of capital.