With the aim of strengthening risk control and mitigate exposure to losses that threaten compliance with the obligations that insurance and surety institutions have with their clients, extensive regulatory frameworks for risk management have been stablished, both internationally and locally:

  • The European Agreement of Solvency II.
  • The Insurance and Surety Institutions Law (LISF by its acronym in Spanish) and the Insurance and Surety Unique Circular (CUSF by its acronym in Spanish) in Mexico.

These new regulatory frameworks have significantly extended the risk management regulation to insurance and surety institutions, stablishing the obligations of:

  • Measure and manage their underwriting, credit, market, liquidity, mismatch, concentration and operational risks.
  • Satisfy a Solvency Capital Requirement (SCR) to guarantee, with a high level of confidence, their ability to cope with the losses caused by the risks which they are exposed. The requirement can be calculated with statutory models or institution’s internal models.

Numeravi provides consultancy to understand the statutory models and methodologies to calculate the SCR. Also provides computer systems to measure risk exposure, with the following added values:

  • We explain with transparency the risk measures and the methodologies that we apply to calculate exposure to risks.
  • We identify, together with the institutions, the areas (insurance lines or risk types) that generate the greatest potential losses and therefore increase the SCR.
  • We identify the particular characteristics of the risks to which each institution is exposed ant that may generate the need for an internal model of capital requirement.

To satisfy Solvency II Regulation, Numeravi offers robust solutions that allow, from compliance with statutory risk management requirements (periodic measurement to risk exposure), up to the development of internal models to calculate SCR.

Risk measurement

We provide external service (outsourcing) of risk management under Solvency II which includes:

1.1 Prepare monthly and quarterly reports of risk exposure, including underwriting, market, liquidity, mismatch, concentration and credit risks.

1.2 Interpretation and analysis of risk exposure measurements.

1.3 Advice to risk and/or investment committees.

1.4 Documentation of models and methodologies.

1.5 Instrumentation of the operational risk management function.

1.6 Development of credit and risk management manuals.

1.8 Audit and technical assessments of the risk management function.

 

We also offer licenses of our risk measurement system, in case the institution decides to develop the function internally.

Internal models

A SCR internal model must accurately estimate the specific needs of capital or own funds based on the particular risks to which an institution is exposed. These risks will depend on the characteristics of each business, markets and operational processes.

Internal models must guarantee that the capital or own funds of an institution is sufficient to fulfill the obligations it has with its clients, even in adverse scenarios.

*For the adoption of an internal model -total or partial- the requirements established both in Mexican and international regulation are very extensive. That’s why its development and instrumentation could become complex and could require an extended period of time in case of not having a deep knowledge of risk management mathematical bases, the SCR statutory calculation model, actuarial sciences, probability and statistics, among other subjects.

Numeravi’s consultants are specialists in market, underwriting, liquidity, operational and credit risk management, areas in which they have decades of experience, which shows that they have the necessary degree of specialization to develop SCR internal models. Among many other projects they have carried out the following:

  • Built and implemented several statistical models and methodologies to measure the underwriting and market risks as well as, the joint risk.
  • Developed efficient computing systems to estimate the exposure to risks of insurance companies, which were built with optimal technologies to perform efficiently stochastic simulation.
  • Analyzed in depth the scope and limitations of the SCR calculation models developed by the CNSF, both in their mathematical basis, as in their implementation in the respective computer system.
  • Since 2010 they have advised insurance institutions in the implementation of the Solvency II agreement, first supporting subsidiary institutions of European companies in the implementation of the Risk-Based Capital Model and later advising several insurers for the implementation of the new Mexican regulation of insurance and surety.
  • They have solid academic background in mathematics, actuarial sciences, probability, statistics, risk management and finance.