Solvency II and Risk Management

Part 4: EMB's Eight Golden Rules for Implementing Solvency II

Part 1|Part 2 | Part 3|Part 4

Have a vision Set it out early and never lose track of it, and communicate it throughout the organisation. This will form the guiding principles for the risk management framework and should inform all the decisions regarding the implementation of the regulation. 

Be focused. Only embark on work that directly contributes to risk and capital goals. It is tempting to look at what else could be ‘added in’ at the same time, but there will be a lot to do. By all means consider other requirements within the overall design but, unless absolutely necessary, leave the implementation of them until phase 2. 

Improve management. Learn the ‘manage your business better’ philosophy – and stick to it. This is among the main objectives of Solvency II. 

Get Value. Solvency II is a big investment: use it to improve the business, as well as meeting regulatory requirements. 

Treat Solvency II as a programme. An early priority is to establish a formal structure, with authority, clear responsibilities and a relatively small team of core resources. The programme will comprise a number of projects: two of which will be the risk framework and capital modelling. You will then have a firm and inclusive basis for moving forward. Having a small core team will avoid over-committing too early and give flexibility as the programme progresses. 

Do not over-commit. Wait until the requirement is well defined – but then move quickly. As the regulation evolves, the task will become clearer – although frequently only after much internal debate on interpretation. Until your own requirements are clear, progress one step at a time through investigations, feasibility studies or pilots – but then address it quickly 

Be flexible. Flexibility is crucial in an evolving regulatory environment. Create an adaptable approach compatible with an evolving regulatory framework. The structure of the programme, plans and monitoring / review process should make it possible to change direction without undue disruption should it be necessary. 

Yesterday is not important. The way you have done things in the past may no longer be appropriate. We are looking at a big change to many business practices; insurers should be prepared to ditch old approaches, regardless of the fact that ‘we’ve always done it like this.’ 


Part 1|Part 2 | Part 3|Part 4

Mike Wilkinson leads the risk management consulting team at EMB.
mike.wilkinson@emb.co.uk