eFrame® for Insurance Solvency II Stress TestingOne-CliCk StreSS teSting fOr inSurerS

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eFrame® for Insurance Solvency II Stress Testing One-CliCk StreSS teSting fOr inSurerS

One-Click Stress Testing for InsurersThe ability to perform regular stress

tests is an important tool in an insurer’s risk management toolbox. By modelling stress scenarios and applying them across the entire portfolio, insurers can gain valuable insight into firm-wide risk exposure, enabling them to make appropriate strategic decisions.

Increasingly, stress testing is not just an internal risk management tool, it’s also a report requested by regulatory bodies seeking to improve their understanding of risk exposure across the entire insurance system. One-off stress tests, such as those carried out by EIOPA, are likely to become more frequent as regulators seek to mitigate or avoid potential industry-wide crises.

Barriers to firm-wide stress testingWhile many insurers are capable of

conducting ad-hoc stress tests within individual business units, challenges arise when attempting to apply a streamlined stress testing methodology across the entire enterprise.

These challenges are both business and technical in nature, and include:

Business Challenges• The language of stress testing is not yet familiar throughout organisations. Converting and communicating stress test results into business intelligence for strategic decision making is an immature capability in many firms

• Portfolio complexity – many insurers deal in multiple insurance types, each with its own assumptions about stress situations and its own calculations to determine the effect of a shock on the portfolio

• Lack of resources – it is hard to dedicate time and effort to running a firm-wide stress test when there are so many other demands on staff time – particularly in the run-up to Solvency II compliance

• Repeatability – today, most stress testing is done as a one-off, manual exercise, often in response to a regulatory request. There is a lack of processes and tools to make stress testing a regular, repeatable and comparable exercise that can really add value to risk-related decision making

Technical Challenges• System complexity – different functional areas of the business use different systems to calculate, analyse and report risk, making it hard to reconcile the results and consolidate them into an accurate, firm-wide report

• Data inconsistency – insurers operating in multiple geographies may have different ways of classifying similar products and entities, requiring an initial classification exercise to ensure that definitions are used consistently across the business (or at least to identify where inconsistencies exist and flag them to regulators and senior management)

• Auditability – when results from different parts of the business are consolidated into a single stress test report, it’s easy to lose track of who supplied which data, which assumptions were used and how it has been validated, undermining confidence in the report’s integrity

eFrame®For InsuranceSolvency II Stress Testing

PROCESSCONTROL &

AUDITABILITY

TIME WINDOW DRIVEN

REPORTING

Actuals vs Appetite

Calculators

Stress test EIOPA reports

Stressed MCEV

Liquidity Ratios

Capital calculation

Consolidation

Capital requirement/SCR/MCR

QRT’s incl. CAT Risk

Other

Capital

Liquidity

Reporting

Calculators

Stressed RP values

ESG Scenarios/Risk factors

Model parameters

Narratives

Data

Counterparty ratings

ALM

Operational losses

Financial data

Data

Stress Test

Regular, firm-wide stress testing at the click of a button

The solution works with existing systems, rather than replacing any software running in the current environment. It offers major benefits to insurance companies looking to standardise and automate stress testing for improved compliance and a more strategic approach to risk management.

Key features include:

• Enterprise visualisation – discover, map and visualise the current business environment (including systems, processes, roles and responsibilities) to understand what needs to be done to introduce a firm-wide stress testing process

• Interactive strategic dashboard – communicate the impacts of stress scenarios on the firm’s risk appetite, tolerance and regulatory thresholds

• Taxonomy-driven data modelling – create a data model with standard, firm-wide definitions for every data point required for the stress test report. This model can be aligned with existing risk models, including Solvency II Standard Formula, for complete consistency

• Automatedworkflow – set up responsibilities and a process flow for supplying and validating data for stress test reports. Alerts and escalations ensure data is supplied and validated in a timely way

• Integration with existing systems – trigger calculations automatically in source systems and import results directly from Excel, or use pre-built connectors to import data from a wide range of finance, modelling, risk and compliance applications

• Powerful reporting capabilities – three styles of reporting help firms to meet regulatory and management requests for stress test information:

• Standard reports: eFrame® comes with a suite of standard, out-of-the-box reports, based on common internal and external requirements

• Custom reports: SecondFloor consultants can implement additional custom reports at your request

• Ad-hoc reporting: eFrame® enables users to run ad-hoc queries against the underlying data to meet one-off information requests

• Fixed-price,fixed-timeimplementation – SecondFloor consultants follow a standard process when implementing the solution, so you know upfront exactly how long the project will take, what it will involve, and how much it will cost

eFrame® for Insurance Solvency II Stress Testing is a powerful and scalable software solution that allows insurers to conduct regular, audited, firm-wide stress tests at the click of a button.

BenefitsBenefits of using eFrame® for firm-wide stress testing include:

• One-click testing – a single click in eFrame® triggers the process to generate a complete, firm-wide Stress Test report within a specified timeframe

• Works with existing IT environment – eFrame® collects, validates and consolidates data from existing calculation and reporting systems, so business can continue with no disruption

• Automated process – eFrame® automates much of the stress test reporting process, triggering calculations in the relevant source systems and collating and consolidating the results

• Processefficiency – where manual intervention is required, for example to validate submitted data, eFrame® orchestrates this through a workflow-based alerting and escalation system, which creates an audit trail and ensures that process bottlenecks do not occur

• Repeatability – once eFrame® is installed, stress tests and reverse stress tests can be run on a regular basis with minimal disruption, using the same assumptions or new assumptions modelled in eFrame®

• Valuable risk analytics – regular, comparable firm-wide stress tests can be an invaluable tool for risk-based decision making and adjusting risk strategy over time

• Faster reporting – eFrame® can generate a firm-wide stress testing report in a matter of days, rather than the weeks that firms currently spend manually collecting, collating and reconciling individual reports

• Full audit trail – eFrame® preserves a record of every action taken to create a report, every calculation made in the production of the figures, and every source system supplying the underlying data

Chosen by the world’s leading insurerseFrame® is being used for Solvency II preparation and reporting by some of Europe’s most complex, multi-country, multi-line insurers.

Find out moreTo learn more about introducing a repeatable, auditable, firm-wide stress testing process with eFrame®:

contact us on +31 88 26 35 463,

email us at info@secondfloor.com,

or visit our website at www.secondfloor.com

Key Features• Interactive strategic dashboard

• Works with existing systems

• Fully traceable and auditable

• Powerful reporting solution

• Sensitivity analysis and calibration

Keybenefits• Valuable tool for risk-related decision making

• Run regular, accurate stress tests at the click of a mouse

• Dramatically reduce the time, cost and effort of stress testing

• Get risk analytics that senior management can trust

• Speed up regulatory, statutory and management reporting

• Supports ORSA requirement of Solvency II

For more details please contact SecondFloor.

About SecondFloorSecondFloor helps firms to comply and produce regulatory information efficiently, consistently. Companies that turn to SecondFloor’ solutions benefit from timely, complete, accurate, traceable, auditable and repeatable reports and analytics. Facilitating stress testing, economic capital calculations, and regulatory reporting in complex environments are key elements of SecondFloor’s credentials that have established it as a successful enabler of business analytics. eFrame®, SecondFloor’s software application, reflects best practice approaches and project accelerators learned with clients during years of experience. SecondFloor is also an IBM risk analytics reseller.

Request a full demonstration Would you like to have a personalized demonstration of the eFrame® for Insurance Solvency II Stress Testing? Please contact us at info@secondfloor.com or simply visit www.secondfloor.com