Solvency II impact on business culture and strategy

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I could not understand the application of all points covered here-

According to Core Reading, Solvency II impacts

1. capital allocation- how? Is it referring to tier 1/tier 2 cap?
2. risk management- due to ORSA
3. performance management- how? What is performance here?
4. optimal product mix- how?
5. product design- how?
6. optimal asset mix- as assets are shocked, few assets lead to a higher capital requirement than others hence insurer would prefer assets which reduce capital requirement
7. corporate structure- how?
8. merger and acquisition activity- how?
9. management information- due to ORSA and reporting requirement of Solvency II
10. market position via external disclosures

Please help in clarifying.

 

[Lindsay Smitherman]

There will be lots of examples of these but a few thoughts to get things going:

• a group might decide to allocate capital around its business units / subsidiaries in proportion to their individual SCRs
• performance management might use return on capital as a measure, with 'capital' reflecting the SCR
• preferred product mix / design can be influenced by how capital intensive a particular product / design is
• corporate restructurings / transaction activity might be driven by trying to improve diversification between risks, to reduce capital requirements