Risk Assessment Framework (RAF) in Poland - risk-based and prospective approach to insurance supervision. September 24-26, 2012

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Derek McCarthy
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1 Risk Assessment Framework (RAF) in Poland - risk-based and prospective approach to insurance supervision September 24-26, 2012 Venue: The InterContinental Warsaw Hotel Solvency II project, which will replace the current solvency requirements, introduces the approach based on the risks, which currently are or may be faced by insurance and reinsurance undertakings in their activity. It is a fundamental review of the capital adequacy regime for the European insurance industry. This is one of the main challenges not only for insurance companies but also for the supervisory authorities. For supervisors one of the key new elements of the risk-based supervision is to carry out the supervisory review process Supervisory Review Process (SRP), coupled with on-site inspections. These are the main general supervisory powers according to Solvency II Directive. SRP should be proportionate, risk based and prospective. During carrying out SRP, supervisory authority should continuously verify the insurance undertakings compliance with law, review and evaluate strategies, processes and reporting procedures to comply with Solvency II and also should assess risks which undertakings face or may face, as well as the undertakings ability to assess those risks. The RAF process is an essential component of the SRP because, when properly applied, it ensures a continuous risk-based and prospective approach to the work carried out by supervisors throughout the SRP. The main aim of RAF is promoting risk based supervision by identifying riskier undertakings and riskier parts of undertakings for supervisory scrutiny. During RAF the supervisory authority should assess inbound information and determine undertaking impact classification and risk classification. Taking into account RAF outcome, supervisory authority should determine the supervisory plan. Although Solvency II system will enter into force in 2014, the Polish Financial Supervision Authority (KNF) is already moving step by step from a compliance assessment towards a risk-based supervision. This process requires new tasks to be taken by supervisors in order to prepare to properly identify, assess and monitor the risk to which undertakings are or could be exposed, as well as to assess the risk management system in each supervised undertaking. During the seminar Risk Assessment Framework (RAF) in Poland - risk-based and prospective approach to insurance supervision we will present the methodology developed by us in order to prepare for implementation of the future requirements of the RAF. The issues planned to be brought up during the presentations, practical examples and case studies are based on the KNF s experience and standards concerning supervision and assessment of risks. In order to enrich the quality of the seminar we have also invited lecturers from domestic insurance companies and audit firms. 1

It is a fundamental review of the capital adequacy regime for the European insurance industry.

2 In particular, the seminar will cover issues regarding: the role and functioning of Supervisory Review Process (SRP) and Risk Assessment Framework (RAF) in the Solvency II regime. It will also summarize various provisions and requirements of Solvency II Directive, Level 2 and Level 3 measures relating to SRP and RAF thus outlaying the Solvency II regulatory environment around these issues, aims and assumptions of Polish RAF, process of annual assessment and RAF methodology, assessment of the quantitative and qualitative assessment (Strategy, Organizational structure, Portfolio, Relationship with customers, Outsourcing, IT systems, Reporting, Relationship with supervisory authority, Internal control/internal audit, Business continuity plan, Reinsurance, Asset management, Solvency II preparation, Risk management system, Ownership, Key persons), requirements regarding members of management boards and supervisory boards of insurance undertakings, corporate governance and owner s supervision along with the identification and evaluation of different mechanisms of owner s supervision, own risk and solvency assessment a tool launched by KNF a few years ago and performed annually by undertakings, preparation of insurance undertakings towards Solvency II requirements and how supervisory authority assess this development, amendments of qualitative assessment and final RAF grade, selection of supervisory activities dependent on the final RAF grade, different approaches towards RAF assessment depending on specific aspects of the undertakings, verification, analyzing and assessing information introduced into RAF questionnaire by insurance companies from the on-site inspection perspective. The aim of the seminar is also to create a discussion forum offering the possibility for supervisors from European countries to share experience and develop the supervisory framework. 2

these issues, aims and assumptions of Polish RAF, process of annual assessment and RAF methodology, assessment of the quantitative and qualitative assessment (Strategy, Organizational structure,

3 Risk Assessment Framework (RAF) in Poland - risk-based and prospective approach to insurance supervision September 24-26, 2012, Warsaw Agenda of the Seminar Day One Monday, September 24, 2012 Moderator: Mr. Mariusz Smętek, Director, Risk Monitoring Department, KNF Polish 9:00 Registration 9:30 Official opening of the seminar by Professor Lesław Gajek, Vice-Chairman, KNF Polish 09:45 Overview of Supervisory Review Process and Risk Assessment Framework in Solvency II regime Lecturer: Ms. Katarzyna Chrzanowska, Risk Monitoring Department, KNF Polish Financial Supervision Authority 11:00 Coffee break 11:15 Risk Assessment Framework in KNF Lecturer: Ms. Jolanta Jagusztyn-Grochowska, Insurance Supervision Department, KNF Polish 12:30 Lunch 13:30 Risk-based supervision in Polish FSA Lecturer: Mr. Grzegorz Szymański, Risk Monitoring Department, KNF Polish Financial Supervision Authority 3

Mariusz Smętek, Director, Risk Monitoring Department, KNF Polish 9:00 Registration 9:30 Official opening of the seminar by Professor Lesław Gajek, Vice-Chairman, KNF Polish 09:45 Overview of

4 15:00 Quantitative assessment of the insurance company for the purpose of RAF assessment Lecturers: Mr. Mariusz Smętek and Mr. Przemysław Grądek, Risk Monitoring Department, KNF Polish 16:30 Closing remarks 19:00 21:00 Dinner Day Two Tuesday, September 25, 2012 Moderator: Mr. Mariusz Smętek, Director, Risk Monitoring Department, KNF Polish 09:00 Opening of day two 09:15 Qualitative assessment of the insurance company for the purpose of RAF assessment (1) (assessment of the modules: Strategy, Organizational structure, Portfolio, Relationship with customers, Outsourcing, IT systems, Reporting, Relationship with supervisory authority, Internal control/internal audit, Business continuity plan, Reinsurance, Asset management) Lecturers: Ms. Mirosława Łopacka and Mr. Tomasz Filak, Insurance Supervision Department, KNF Polish 11:15 Coffee break 11:30 Qualitative assessment of the insurance company for the purpose of RAF assessment (2) (assessment of the modules: Key persons, Owner s supervision) Lecturers: Mr. Robert Lasocki and Ms. Aleksandra Szumska, Insurance and Pension Licensing Department, KNF Polish 12:30 Lunch 4

Mariusz Smętek, Director, Risk Monitoring Department, KNF Polish 09:00 Opening of day two 09:15 Qualitative assessment of the insurance company for the purpose of RAF assessment (1) (assessment of

5 13:30 Qualitative assessment of the insurance company for the purpose of RAF assessment (3) (assessment of the modules: Risk management, Solvency II preparation) Lecturer: Mr. Grzegorz Szymański, Risk Monitoring Department, KNF Polish Financial Supervision Authority 14:30 Verification of RAF questionnaire and RAF assessment through on-site inspection of insurance companies. Lecturers: Mr. Tomasz Krupa and Ms. Magdalena Bereś, Insurance and Pension Inspection Department, KNF Polish 15:30 Final RAF grade and supervisory activities Lecturers: Ms. Jolanta Jagusztyn-Grochowska, Ms. Mirosława Łopacka and Mr. Tomasz Filak, Insurance Supervision Department, KNF Polish 16:30 Closing remarks 18:00 21:00 Social program Day Three Wednesday, September 26, 2012 Moderator: Mr. Mariusz Smętek, Director, Risk Monitoring Department, KNF Polish 09:00 Opening of day three 09:15 Qualitative and quantitative assessment - case study Lecturers: Ms. Jolanta Jagusztyn-Grochowska, Insurance Supervision Department, KNF Polish Mr. Przemysław Grądek, Risk Monitoring Department, KNF Polish Financial Supervision Authority 11:15 Coffee break 5

Lecturers: Mr. Tomasz Krupa and Ms. Magdalena Bereś, Insurance and Pension Inspection Department, KNF Polish 15:30 Final RAF grade and supervisory activities Lecturers: Ms.

6 11:30 The use of the RAF assessment in the management of insurance company Lecturer: Ms. Monika Guzek, Compliance Officer, PZU SA 12:30 What does risk-based audit mean for insurance industry? Lecturer: Mr. Artur Chądzyński, Senior Manager, Ernst & Young Poland 14:00 Panel discussion 14:15 Closing of the seminar by Mr. Damian Jaworski Director, Analyses and International Cooperation Department, KNF Polish 14:30 Lunch 6

Guidelines on supervisory review process

EIOPA-BoS-14/179 EN Guidelines on supervisory review process EIOPA Westhafen Tower, Westhafenplatz 1-60327 Frankfurt Germany - Tel. + 49 69-951119-20; Fax. + 49 69-951119-19; email: info@eiopa.europa.eu