Protecting the watchdogs as well as the operators

The financial regulatory institution covering the insurance industry approached PwC as they needed to give the European insurance market reassurance on the risk free interest rate calculation (RFR) that they perform which is used to measure insurance companies’ balance sheets for Solvency II purposes.

The RFR is published by the client monthly across 26 different currencies for every duration from 1 year up to 50 years (The duration of the bonds, loans and securitizations included in the portfolio being valued), using a complex model. If the client were to get some of the numbers wrong by just 1 basis point that would equal about 1 billion Euros of liabilities different across the whole market so it is very important for them to get it right! They had also had some challenges from the industry about how the model was working.

Meet PwC’s FS Risk and Regulation team including insurance regulatory and data and analytics specialists in the UK and in Germany.

The PwC team reviewed the client’s own controls and governance and re-built their Risk Free Rate (RFR) model in a different platform to benchmark whether the calculations were the same.  They then issued the client with recommendations for the future and independent reassurance that the calculation model was working correctly.

How did we add value?  How did we get the Client ready for change?

PwC demonstrated how the firm can work together across competencies to deliver an innovative solution to a complex challenge.

PwC are seen as the leading provider of services to the insurance market across Europe. Because of the way in which the FSRR competency is structured at PwC, we were able to quickly assemble a team to analyse the client’s initial requirements, recommend improvements to the initial brief and make change happen.

As part of our service, the team also provided advice to the Client as to how they could enhance their own governance and controls.

How did we help the client stand out for the right reasons?

The regulator was able to demonstrate to government and the Insurance Industry that all of the work that it had been doing to oversee the new Solvency II regulation was fit for purpose and that it had emerged stronger with a framework of continuing good governance for the future.

Contact us

Andy Moore

Partner, PwC United Kingdom

Tel: +44 (0)7702 677 654

George Stylianides

Global FS Risk lead, PwC United Kingdom

Tel: +44 (0)207 804 3364

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