Research and publications

How to Calibrate Risk Appetite, Tolerance and Limits: The Issues at Stake for Capital Allocation, ERM and Business Performance

The Solvency II prudential framework which comes into to effect in January 2016, is likely to trigger profound changes in the insurance sector, notably i) by requiring a holistic vision of risk management, ii) coherent with risk appetite as defined in accordance with governing bodies, and iii) in line with a clearly identified governance structure. Although the Directive leaves insurance companies free to choose how they structure the risk management system and function, it does, however, require that this system be fully integrated into the organisation and the decision-making process. This requires a real overhaul of the organisation of most companies and a significant cultural (r)evolution, notably in the formalisation of risk appetite.

Author(s) :

Philippe Foulquier, Liliana Arias

Summary :

The Solvency II prudential framework which comes into to effect in January 2016, is likely to trigger profound changes in the insurance sector, notably i) by requiring a holistic vision of risk management, ii) coherent with risk appetite as defined in accordance with governing bodies, and iii) in line with a clearly identified governance structure. Although the Directive leaves insurance companies free to choose how they structure the risk management system and function, it does, however, require that this system be fully integrated into the organisation and the decision-making process. This requires a real overhaul of the organisation of most companies and a significant cultural (r)evolution, notably in the formalisation of risk appetite.

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Type : EDHEC Publication
Date : 25/01/2016
Keywords :

Solvency II