Solvency Capital / Basel II

riskpro™ covers insurance, market and credit risk reporting for Solvency II for the standard and the internal approaches. The strength of riskpro™ is especially beneficial to the internal approach.

Beyond Solvency riskpro™ can be used for budgeting and income forecasting, liquidity testing, credit down-grade testing and virtually any financial analysis of interest. The IFRS valuation capabilities are of further interest.

In a nutshell riskpro™ is an excellent simulation engine for insurances.

Standard approach

riskpro™ is widely used by banks for Basel II on a highly sophisticated level. The Solvency II requirements are slight variants of the banking requirements in the market and credit risk areas. They are fully covered by the riskpro™ stress testing capabilities. Also insurance risk is fully covered. For life insurance it is possible to use cash-flows calculated by actuary tools such as Prophet or any internal tool.

Internal approach

The strong dynamic simulation capabilities allow specifying simple to most sophisticated DCF models. Dynamic simulation allows forecasting value, income and risk on the basis of cash flows. Value can be measured in book and economic terms. The distribution of the economic capital can be forecasted at a one year horizon or any other defined horizon. This combined with the implemented dynamic Monte Carlo simulation techniques leads to a distribution of the economic capital.

The relationship between assets and liabilities is kept consistent. Any surplus currency unit is invested following the insurances investment policy and made subject to the corresponding market conditions.

Further detail is found in the fact sheet "Dynamic Simulation. Planning SEM".

Instrument coverage

All methods are applied consistently across all types of financial instruments including insurance contracts. Non-Life insurance contracts can be fully modeled: Premium Cycles, Frequencies and Severities following any of the relevant distributions and reserving risk. Life insurance contracts can be linked to actuary output which guarantees full consistency between the two views.

Special riskpro™ strengths

• Full integration of all risk factors (insurance, market and credit risk)
• Full consistency between value, income, liquidity and risk
• Parallel multi valuation (economic value, book value following IFRS, Local GAAP)
• Balancing mechanism with full consistency between assets and liabilities.
• Allows the definition of run-off and going concern scenarios
• Fully usable outside Solvency II for other financial analysis such as IFRS, budgeting, income forecasting, etc.
• Suits the needs of simple to very sophisticated institutions
• Strong back testing capability