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September 2012 question 2 (i) & (ii)

Discussion in 'SP9' started by Edwin, Sep 1, 2014.

  1. Edwin

    Edwin Member

    Hi all, while i posted earlier on the fact that parts (iii) and (iv)of this question were straightforward, it is part (i) and (ii) that are currently confusing.

    PART (i)

    May i first understand what the kernel of the question is, i had thought the examiners were looking to tailer Solvency 2 to the "small, poor and undeveloped country". So my solution included the following with mention of how to adjust to the size of the company and comments about some solvency 2 approaches not being applicable at all;-

    • ORSA on a small scale
    • Twin peak approach
    • SCR, MCR with some components adjusted and maybe the expert could develop a simpler SCR formula
    • 3 pillar approach

    The examiners on the other hand focused on a much general approach. To me they overlooked the fact that the guy is a Solvency 2 expert and that the new regulation was required to be similar to Solvency 2.

    I am not convinced that the points i outlined above with the tailoring to the specifics of the country do not apply, e.g just because the country is poor doesn't mean that SCR can't be introduced after reducing complexities and coming up with a simpler version.

    PART (ii)

    Again in preparation for the new regulation, i acknowledged some of the points shown by the examiners but in addition, i had Quantitative Impact studies, again keeping in mind the nature of the country.

    Someone kindly come to my rescue.
     
    Edwin, Sep 1, 2014
    #1
  2. Simon James

    Simon James ActEd Tutor Staff Member

    I don't think the examiners were looking for you to "tailor" Solvency II, but possibly to hijack some ideas!

    A key distinction in the question is the word “immediate”. Part (i) requires initiatives that can be introduced rapidly, whereas Part (ii) is focussing on preparations for the longer term.

    Broad categories of “immediate” actions might include: collecting more and better information, conducting visits and checking financial transactions.

    Changes to rules on capital or corporate governance would take longer to consult on, agree and enact.

    As a poor country, costly solutions are to be avoided.

    I would not expect the examiners to award marks for discussing Solvency II regulations which are not appropriate to the situation. Be careful reading the question, the examiners specify that the regulations are similar in that they are risk-based not that they are similar to Solvency II.

    Suggesting a QIS (to the extent that it is practical in this country) is a valid point for part (ii) I would say.
     
    Simon James, Sep 5, 2014
    #2

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