All insurers will have to assimilate the standard formula
How does your standard formula work?
Our solution is a version of the model developed for banks to satisfy the Basel II criteria. It is therefore the same technical architecture. The modules by types of risk are more or less similar between banks and insurance companies, such as operational risks, credit and market risks, plus new data such as underwriting risks for life and non-life insurance, health risk, protection risk, etc. By aggregating all these risks, which are correlated to each other, the standard formula enables the company to calculate the overall capital requirement (the SCR - Solvency capital requirement). Upstream, our solution covers the management of the company’s risk data, estimates its assets and liabilities on a market basis and analyses the stress tests.
Is the standard formula reserved for the smallest insurers?
In fact it is intended for all types of insurance companies since, even if the biggest insurance companies already have their own risk calculation models, they will all have to assimilate the standard formula. Moreover, they need a technological base, an architecture which facilitates the organisation of the different services and business lines in order to cover all aspects of the regulation (total SCR, quality and traceability of data, reporting transparency, etc.).