José Morago, Aviva's group risk director and chairman of the Institute of Risk Management
What element of Solvency II has been the most challenging for the industry?
There is an overarching theme around adapting and transforming the business to embrace Solvency II. From a pillar 1 perspective, this means having a well-documented, independently validated and well-run model, which can support decision making. This has been challenging and is something that requires resources and time.
Managing regulatory uncertainty, in particular about the matching adjustment and the risk margin, has also been challenging.
From a pillar 2 perspective, it has been the change in culture and mind-set of the organisation. You must have a stronger risk-based decision-making process, supported by stress testing, the own risk and solvency assessment, as well as more information. This change has been challenging, but it is also a key benefit of Solvency II.
What was the most memorable moment of the Solvency II preparations?
Political intervention and regulatory uncertainty have been very interesting. At some point, we did not know whether Solvency II would go live in 2016 or 2017. The starting date has moved in the last ten years a few times, creating additional costs for the industry and increasing the challenge of implementing the regulation.
What will be the main risk-management challenge in 2016?
Moving from project-based phase to business-as-usual requires us to rethink the operating model. There are also huge challenges for the industry in terms of new risks, such as digital and cyber. Forward-looking risk management is needed to make sure that businesses remain fit for purpose.