The EU Solvency II review: 10 “stakes in the ground” from EIOPA’s consultation

The EU Solvency II review 10 stakes in the ground” from EIOPA’s consultation

EIOPA’s extensive recent consultation1 on the 2020 review of Solvency II gives a first indication of the changes to Solvency II that EIOPA will recommend to the European Commission.

This blog highlights ten over-arching topics from the consultation that we consider indicate where significant change is and is not likely, and which in turn could have an important bearing on the UK’s post-Brexit prudential capital regime. Each topic is detailed in the appendix to this blog.

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Posted on 21/11/2019 | 0 Comments

Uncovering the benefits of client lifecycle value for investment banks during challenging times

Uncovering the benefits of client lifetime value for investment banks during challenging times

Last month, our article1 outlined our views on re-discovering customer lifetime value (“CLV”) within the capital markets sector. This month, we explore why adopting a CLV lens to customer lifecycle management can bring enhanced benefits for both corporate and investment banks (“CIB”) and their clients.

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Posted on 19/11/2019 | 0 Comments

Smarter Better Faster: The next generation of risk modelling with Machine Learning

Smarter Better Faster The next generation of risk modelling with Machine Learning
Alan Turing’s seminal 1950 paper "Computing Machinery and Intelligence", posed the question "Can machines think?" Introducing the idea of the first “learning machine with the potential of becoming artificially intelligent”. Since then machine learning (ML) has found its way into numerous processes; seeking to simplify our lives by making processes smarter, better and faster. Financial risk management is an industry that is rife with opportunities for ML to disrupt in the coming years, one of the most obvious areas being credit scoring.

In this blog we explore some of the main findings of the recently published Bank of England survey on ML, this is followed by our views on the challenges and potential solutions of implementing ML within a credit risk scoring framework.

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Posted on 13/11/2019 | 0 Comments

PRA Dear CEO letter highlights continued concerns over the quality of regulatory reporting

PRA Dear CEO letter highlights continued concerns over the quality of regulatory reporting
On 31st October, the PRA published a Dear CEO letter to remind banks, building societies and designated investment firms that they are required to submit complete, timely and accurate regulatory returns.  The fact that the PRA has seen the need to issue a reminder about such a core regulatory obligation reflects its concern about errors in regulatory reporting (both public and identified by the PRA in the course of its supervision) and what it sees as the need for appropriate investment in both data quality and processes to ensure the accuracy and completeness of reporting.

In this blog we consider how firms have been addressing regulatory reporting challenges to date, identify key areas of focus for Senior Managers, Boards and Audit Committees and provide our view on how firms might respond to the letter and how we can assist.

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Posted on 11/11/2019 | 0 Comments

Green Wishes without Greenwash – The FCA’s Green Finance and Climate Change Statement

Green Wishers
The FCA’s Feedback Statement focuses on greenwashing, disclosure and integration of material climate change risks and opportunities into business, risk and investment decisions.

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Posted on 31/10/2019 | 0 Comments

Illiquid retail funds: FCA strengthens investor protection but drops some measures trailed in its consultation

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With the spotlight falling increasingly on fund liquidity risks, not least from central banks concerned about emerging systemic risks, the Financial Conduct Authority (FCA) has published its final rules on liquidity risk management for non-UCITS retail schemes (NURS). The FCA started reviewing these rules after several property funds were suspended in the wake of the 2016 EU referendum. The FCA has stated that it has also taken into account lessons from the Woodford Equity Income Fund suspension in June 2019. Importantly, however, the new rules will not apply to UCITS funds such as the Woodford fund. We therefore expect further rule changes for such mainstream retail funds in the near term.

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Posted on 25/10/2019 | 0 Comments

The importance of valuation standards in ILS

Magnifyglass_loTwo years of significant loss events, many of which have experienced significant loss deterioration, have exposed some limitations and areas of improvement of the ILS fund management industry. This should be expected of an industry whose core product hadn’t been tested through to the end of its lifecycle for several years, due to a series of benign cat years. The key lies in how the industry responds to these challenges, and determining how issues can be mitigated in the future to support the (still nascent) insurance securitisation process.

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Posted on 22/10/2019 | 0 Comments

No let-up in the FCA’s scrutiny of wealth and investment management firms’ market abuse controls

No let-up in the FCA’s scrutiny of firms’ market abuse controls

Many financial services firms operate globally and are faced with numerous regulators and regulations covering market abuse. Firms answer to a combination of the SEC and CFTC in the United States, HKMA, MAS, JFSA and ASIC in Asia Pacific, and the FCA, AMF, BaFin and other national regulators in Europe. These European regulators enforce the EU’s Market Abuse Regulation (MAR) alongside their own domestic laws stemming from the Market Abuse Directive (MAD).

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Posted on 18/10/2019 | 0 Comments

IFRS 17 for Internal Audit – Implementation Roadmap

IFRS 17 internal audit

This is the first in a series of posts focusing on themes and hot topics relevant to Internal Audit functions in organisations in the process of adopting IFRS 17 Insurance Contracts.

IFRS 17 is the most significant change in insurance accounting for a generation. For many insurers, particularly in the Life Insurance industry, understanding and delivering the necessary changes is complex and permeates the entire organisation. With this in mind, it is clear that an effective implementation plan that is well understood by its users is critical to an organisation’s IFRS 17 project running successfully.

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Posted on 16/10/2019 | 0 Comments

Lean reinsurers: ILS 2.0?

The enormous growth of alternative capital in to property catastrophe reinsurance is arguably the single most significant change in the overall (re)insurance market of the last decade. The supply/demand balance for property catastrophe reinsurance in particular has fundamentally altered, with Guy Carpenter’s Rate on Line index falling 31% between 2013-2017 (of course helped by benign cat years). Even after 2 years of significant losses, it is unlikely prices will return to what was seen in the ‘hard market’ of 2010 and 2011 again.

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Posted on 14/10/2019 | 0 Comments

Liquidity risk management for insurers – PRA Supervisory Statement SS5/19

WaterThe PRA has published SS5/19, which is effective immediately, and represents a significant strengthening in the PRA’s expectations regarding the liquidity risk framework of all insurers, not just those which have obvious liquidity risk exposures.

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Posted on 07/10/2019 | 0 Comments