Quadrant today announces that it is building S2, a strategic solution to meet the requirements for European Insurance Companies under the proposed new EU wide capital adequacy regime for the insurance industry, Solvency II, planned to be introduced in 2010.
Paul Lockyear, founder of Quadrant and COO says, âS2 will address the risk based capital adequacy requirements for the insurance industry being introduced with Solvency II. S2 will be an enhancement of our B2 integrated data repository and compliance engine developed initially for the international banking industry in response to the Basel II Capital Accordâ. He says there are clear parallels between Basel II and Solvency II. They are both based on the three âpillarsâ approach and risk based modelling for calculating capital requirements. Quadrantâs strategy of developing a data repository capable of providing an integrated compliance solution enables Quadrant to easily develop a solution to meet the requirements of Solvency II.
Quadrantâs Risk Consultancy Practice is working with leading insurance companies on their requirements and planning for Solvency II and will provide a full range of analysis, process and policy definition services, as well as system implementation for Solvency II and S2.
Solvency II is a fundamental review of the capital adequacy regime for the European insurance industry. The framework is based on the three âpillarsâ approach of the Basel II regulations currently being implemented for the banking industry. Pillar 1 will set out the Minimum Capital Requirements (MCR) insurance companies will be required to meet for insurance, credit, market and operational risk; Pillar 2 defines the Supervisory Review Process and Pillar 3 the disclosure and transparency requirements. Industry consultation will be on-going during the next 18 months and implementation is currently planned for 2010.
Early in 2006 and in line with the on-going consultation process, the UK Treasury made the following statement in relation to the development of Solvency II in an integrated European environment:
âThere is a strong economic rationale for a reformed EU-wide solvency framework which is forward-looking in its assessment of risk and brings regulatory capital into line with economic capital. However, Solvency II cannot just be about capital requirements; no amount of capital can substitute for the capacity to understand, measure and manage risk and no formula or model can capture every aspect of the risks an insurer faces. The new framework should promote higher quality risk management, working with the grain of industry developments, and ensure that the assessment of regulatory capital is integrated with firmsâ wider capital management processes", see HM Treasury Discussion Paper; Solvency II: a new framework for prudential regulation of insurance in the EU - February 2006.
According to Paul Lockyear, this statement really encapsulates Quadrantâs philosophy on Risk Intelligence and the approach behind the solutions they build.