Table of Contents n Trend in Solvency Regimes Globally n Case Study: US RBC Regime n Summary 2

Solvency Regimes: Trend & Case Studies Jason Zhang, FSA, CFA, FRM Chief Pricing Actuary, RGA Korea November 5, 2013

Table of Contents n Trend in Solvency Regimes Globally n Case Study: US RBC Regime n Summary 2

Trend in Solvency Regimes Globally 3

Evolution of Global Solvency Regimes Regulations on capital in banking Industry, Insurance accounting Basel II Initiation IFRS4 phase 1 Enforcement IFRS4 phase 2 Undertake 2004 Global Financial Crisis Basel III phased enforcement IFRS4 phase 2 draft (2nd) 2013 Basel III full enforcement IFRS phase 2 enforcement? 2018 EU Solvency II Solvency II Project Initiation Solvency II Directive Approved Solvency II Directive enforcement? 2001 QIS 1 Initiation 2005 2008 2009 QIS 5 enforcement 2011 2012 2015 US RBC/SMI* RBC/SMI* Initiation ORSA** Proposal ORSA Pilot test ORSA Enforcement RBC Reform? Happening in Asia Pacific: Australia: LAGIC came into effect on 2013.1.1, concluding 2.5 year of regulatory and industry efforts to roll out the 1st 2 nd generation principle-based solvency in the world. Singapore: MAS issued 1 st consultation paper on RBC 2 in 2012, laying out methodology, approach and timeline for its 2 nd generational solvency. Currently in discussion. Latest Update: Solvency II implementation date delayed to 2016.1.1 IAIS announced its plan to develop a risk based global Insurance Capital Standard (ICS) by 2016 with implement starting in 2019. Source: KIRI, RGA, * SMI : Solvency Modernization Initiative, ** ORSA: Own Risk and Solvency Assessment 4

Case Study: US RBC Regime 5

US RBC History 1989-1990 Lack of uniformity in regulation of insurance companies Actuarial certification Audit of financial statements Capital requirements Actuary opined only on the reserves Growing number of insolvencies Offshore reinsurers Dingell Report: Failed promises: insurance company insolvencies Savings & loan crisis Concern over Federal regulation Number of Insolvencies Insolvencies 50 45 40 35 30 25 20 15 10 5 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 Year Source: U.S. Congress, Committee on Energy and Commerce, Subcommittee on Oversight and Investigations, Failed Promises: Insurance Company Insolvencies, 101 st Congress, 2 nd sess., Committee Print 101-P (Washington: GPO, 1990 6

US RBC History NAIC s Response Appointed actuary concept Asset adequacy analysis Require an audit of statutory financial statements Stricter reinsurance regulation Risk Based Capital (RBC) introduced for the following purposes: Raises a safety net for insurers Creates uniformity among the states Provides regulatory authority for timely action Provides a capital adequacy standard that is related to risk RBC Evolvement & Methodology RBC introduced a factor-based approach: 1993: Life 1994: Property / Casualty 1998: Health RBC is largely factor-based. The following are principle-based: C3 Phase 1 Applies to annuities and single premium whole life Calculated based on scenarios with the intent to represent 95th percentile C3 Phase 2 Applies to equity related risk in variable products Calculated based on scenarios with the intent to represent continuous tail expectation at the 90th percentile (CTE 90) 7

US Insurance Industry during the GFC US Insurers AIG, Hartford and Lincoln Financial were bailed out by the government Losses concentrated in mortgage-backed securities and VA guarantees NAIC s change in deferred tax accounting and RMBS initiative added estimated $16 billion risk capital Lessons-Learned Qualitative: risk and capital allocation at strategic level Quantitative: Over-reliance on rating agencies for managing credit risks, overreliance on quantitative models for managing correlation and tail risks Lack of business discipline US Government Bailout during GFC Number of Recipients Total Disbursed Bailout Amount Realized Profit / Net Outstanding Insurance Companies 3 $72.2 Billion $6.1 Billion Insurance excl. AIG 2 $4.4 Billion $1.1 Billion All Companies 936 $608 Billion -$53.6 Billion Insurers fared relatively well compared to other financial sectors Source: PROPUBLICA.ORG, as of October 7, 2013 8

Regulatory Reaction with RBC Regime through the GFC Deferred Tax Asset: changed statutory accounting to allow deferred tax asset as capital requirement Changed a component of the deferred tax asset admission calculation NAIC vote of 33 ayes and 22 nays proved an ongoing reluctance by regulators. NAIC s change in deferred tax accounting added an estimated $16 billion risk capital RMBS Initiative: reduced RBC factor on certain RMBS holdings in insurers investment portfolio NAIC hired PIMCO to assist state regulators in establishing the new methodology for examining RMBS New RBC factors reflected reduced risks on RMBS holdings that are re-valued Added an estimated $5 billion risk capital Insurance regulators have long understood the need for conservatism in insurer s financial statements as evidenced by our current conservative reserving requirements, disallowance of assets for acquisition costs and non-admission of many other assets, Mr. Roger Sevigny, 2009 NAIC President and New Hampshire Insurance Commissioner, said in a statement. This change recognizes that fact, but also recognizes that over-conservatism can actually be detrimental to consumers. Source: NAIC 9

US: Solvency Modernization Initiative (SMI) Articulation of U.S. Solvency Framework and Principles Study of the future of Statutory Accounting Reinsurance Group Supervision Study of the Risk-Based Capital calculation Select the calibration ( safety ) level and time horizon for RBC, recognizing that RBC is designed to identify weakly capitalized companies rather than mirror a company s economic target capital calculations Identify missing risks (e.g., P&C catastrophe risk, operational risk) in the RBC formula and create risk charges for those risks Governance and Risk Management U.S. regulators acknowledged that the revised risk-focused surveillance approach already includes a review of certain corporate governance activities ORSA (Own Risk & Solvency Assessment) 10

US: Own Risk and Solvency Assessment (ORSA) Background As part of NAIC Solvency Modernization Initiative (SMI), a preliminary committee of the NAIC voted to adopt a significant new additional to U.S. insurance regulation, the U.S. Own Risk and Solvency Assessment (ORSA) in November 2011 NAIC also issued a Guidance Manual (November 2011) to provide insurers/insurance groups regarding ORSA requirements NAIC ORSA s Two Key Requirements The ORSA is a process and a regulatory filing NAIC ORSA involves a self-assessment of the insurer s risk management framework and solvency position 11

Summary Global trend towards more robust solvency capital regime in the near future A case study of US RBC regime shows it had been generally effective during the Global Financial Crisis Future roadmap for US solvency modernization incorporates lessons-learned from recent past to make it a more robust solvency system 12

CONTENTS I. 위험기준재무건전성규제 II. 재무건전성규제현황 III. 재무건전성규제강화영향 IV. 재무건전성규제로드맵

CONTENTS I. 위험기준재무건전성규제 II. 재무건전성규제현황 III. 재무건전성규제강화영향 IV. 재무건전성규제로드맵

1.1. 위험기준재무건전성규제 금융감독당국, 기존감독방식에따른재무건전성감독의한계인식 보험회사, 위험관리를강화해야하는경영환경에직면 보험회사 금융감독당국 글로벌화 EU: Solvency I US: RBC Solvency Ⅱ RBC/SMI 겸업화 금융공학 신상품 위험관리 강화 모든위험모니터링 자산및부채時價평가 (IFRS4) 보험회사간위험수준비교 보험회사의위험관리유인강화 부실화이전조기개입 4

1.2. 국제적인추세 : 미국과유럽 전면적인개혁 ( 유럽 ) v. 정성평가개혁, 정량평가기존유지 ( 미국 ) - 유럽과미국의재무건전성감독방식의점진적수렴을기대 Pillar 1 Pillar 2 Pillar 3 가용자본 ( 보유자본 ) 요구자본 ( 위험총량 ) PCR 비율 100% 이상요구 자본계층화 (IAIS, EU SII) 정량평가 Prescribed Capital Requirements 시장 금리 신용 보험 손실흡수능력따른자본인정범위차별화 위험세분화 회사별특성반영 신뢰수준상향 (1 년, 99.5%VaR) 보고및공시 운영 정성평가 ORSA 보험회사관점에서위험관리 (ERM) 모니터링강화 5

1.3. 위험기준재무건전성규제 : 지역별대응 2000 2004 2008 2009 2011 2012 2015 + EU Solvency II Solvency I 시행 (1973~) Solvency II Project 시작 Solvency II 3-pillar 도입 Solvency II Directive 승인 Solvency II QIS 5 시행 Solvency II 정량평가시행? 2018 정성평가시행? 2016 US RBC/SMI RBC 도입 (1993~) SMI Project 시작 ORSA Proposal RBC 일부개선 ORSA Pilot test ORSA 시행 (2015) 아시아 일본 RBC 도입 (1997) 싱가포르 RBC 도입 (2004) 싱가포르 RBC 2 로드맵발표 일본 RBC 신뢰수준상향 (90% 95%) 싱가포르 RBC 2 시행 2016? Wait and See Strategy RBC 채택국가 : 인도네시아 (2000), 대만 (2002), 말레이시아 (2009), 태국 (2011) 등 Solvency I 채택국가 : 중국, 인도등 한국 RBC Solvency I 시행 (1999~) RBC 도입 Solvency I 병행 RBC 단독시행 RAAS 도입 CAMEL 병행 RBC 강화 (2012~2015) RAAS 통합시행 6

CONTENTS I. 위험기준재무건전성규제 II. 재무건전성규제현황 III. 재무건전성규제강화영향 IV. 재무건전성규제로드맵

2.1. 국내재무건전성규제 : 자본규제현황 RBC 표준모형 + RBC 비율 150% 이상유지 ( 정량평가 ) 보험회사위험지표모니터링 (RAAS) 으로경영실태평가 ( 정성평가 ) 가용자본 ( 보유자본 ) 요구자본 ( 위험총량 ) ± 시장위험 금리위험 신용위험 보험위험 기본자본 + 보완자본 차감항목 ( 자본계층화 ) RBC (1 년, 95%VaR) RBC 비율 100% 미만시 금융감독당국개입 관행 : 150% 이상요구 RAAS 등급취약시개입 요구자본조정 ( 운영위험량 ) 운영위험 RAAS ( 감독관점에서위험관리모니터링 ) - 종합 3 등급이하또는 - 개별항목 4 등급이하 8

2.2. 보험회사안정성현황 : RBC 비율 평균 RBC 비율 : 생명보험 277.7%, 손해보험 264.3% 대다수보험회사, 권고 RBC 비율 150% 이상을유지 350% 300% 250% 생명 손해 277.7% 264.3% 12 10 8 2013.6 현재 생명 손해 200% 150% 현행감독관행 : 150% 이상유지요구 6 100% 법규상준수비율 : 100% 이상 4 50% 2 0% 11.06 11.09 11.12 12.03 12.06 12.09 12.12 13.03 13.06 - "100+" "150+" "200+" "300+" 9

2.3. 보험회사자본확충현황 보험회사, 지속적으로자본확충중 자본확충환경열악 : 수익성악화, 채권발행제약 6.00% 5.88% 생명 700 단위 : 십억원 4.00% 2.00% 5.10% 손해 자산운용수익률 4.79% 4.25% 600 500 후순위채 0.00% 400 증자 6.00% 5.00% 4.00% 3.00% 2.00% 11.03 12.03 13.03 영업이익률 5.14% 생명 3.84% 손해 2.80% 2.23% 300 200 100 1.00% 0.00% - 11.03 12.03 13.03 2012 2013.9 10

2.4. 금융감독당국의규제강화플랜진행 짧은이행기간 : 3 년이내단계별시행으로 2015 년까지모두완료 RBC 규제강화및부채적정성평가강화병행 RBC 규제강화플랜 (2012.10) 시행시기가격규제, 부채시가평가, RBC 추가규제시행시기 0 모든보험회사에 RBC 비율 150% 이상유지권고 2011 * 표준이율인하에따른보험료인상은억제 2013 - 실질적신뢰수준상향 (95% 99%) 효과 * 공시이율산출식의보험사재량권축소 2013 1 지급여력금액 ( 가용자본 ) 계층화 2012 * 신계약비이연한도축소 2013 2 비상위험준비금이연법인세자본인정제외 2015 * 매도가능증권손상평가 2013 * IFRS4 phase II 대비부채적정성평가 (LAT) 강화 2014 3 변액보험보증위험액산출개선 2013 4 보험위험 ( 장기보험 ) 신뢰수준상향 (95% 99%) 2013 5 보험위험 ( 단기보험 ) 신뢰수준상향 (95% 99%) 2014 6 금리역마진위험도입 2013 7 금리위험신뢰수준상향 (95% 99%) 2014 * 금리위험계수슬라이딩방식도입 : 최저보증 2014 8 신용위험신뢰수준상향 (95% 99%) 2014 * 대출위험계수 ( 담보, 소매대출 ) 상향등 2012 * 신종자본증권신용위험계수상향 2014 9 리스크상관계수도입 2014 10 연결 RBC제도도입 2015 11

CONTENTS I. 위험기준재무건전성규제 II. 재무건전성규제현황 III. 재무건전성규제강화영향 IV. 재무건전성규제로드맵

3.1. RBC 강화영향 RBC 강화 : 금리위험및신용위험신뢰수준상향시 - 요구자본최대 39% 까지증가예상 18 생명 ( 농협제외 ) 보험부채 400 가용자본 58 요구자본 21 RBC 비율 277% 요구자본 35% 증가 RBC 비율 207% 요구자본 28 16 14 12 10 8 6 4 2 - 손해 "100+" "150+" RBC비율 150% 미만생명보험회사 : 6개사 RBC비율 150% 미만손해보험회사 : 6개사 13

3.2. 부채시가평가영향 부채시가평가 : 할인율하향 - 생명보험 : 할인율 3.5% 적용시, 책임준비금최대 16% 까지증가예상 20 18 생명 ( 농협제외 ) 16 보험부채 400 보험부채 420 14 12 책임준비금 5% 증가 10 8 6 가용자본 58 요구자본 21 가용자본 38 요구자본 21 4 2 - RBC 비율 277% RBC 비율 181% "100-" "100+" "150+" RBC 비율 150% 미만생명보험회사 : 5 개사 손해보험 : 부채시가평가의영향이상대적으로크지않을것으로예상 14

3.3. RBC 강화와부채시가평가병행 가용자본감소와요구자본증가가동시에발생 생명보험사 23 개사중 11 개사, RBC 비율 150% 에미달 RBC 현행유지 RBC 신뢰수준강화 부채평가현행유지 0 6 부채평가時價평가시행 5 11 15

3.4. 규제강화에따른소요기간 RBC 강화와부채시가평가병행시, - 가용자본감소와요구자본증가에당기순익전액내부유보로대응하더라도 - 5년이상지나야 RBC 150% 회복 (5개생명보험회사 ) * 가정 : 추가적인가격규제없이수익성등다른조건이그대로유지 부채시가평가만강화할경우 : RBC 비율 150% 회복에 4 년소요 < 참고 > 두규제에대응한 RBC비율유지수단 (1) 당기순익내부유보 (2) 채권발행 (3) 유상증자 16

CONTENTS I. 위험기준재무건전성규제 II. 재무건전성규제현황 III. 재무건전성규제강화영향 IV. 재무건전성규제로드맵

4.1. 보험료, 준비금, 자본규제 재무건전성관련규제간상호작용을고려한종합적인로드맵제시가필요 자산운용규제 : 수익률하락 보험료규제 : 보험료인상억제 준비금규제 : 부채시가평가 자산운용 위험보장 보험계약자 자본규제 : RBC 강화 예금자보호제도 : 변액보험최저보증추가 18

4.2. 선부채적정성평가, 후자본규제 국내보험산업에적용될국제기준 - IFRS4 phase II : 2018년부채시가평가시행 ( 국내보험회사의무적용 ) - 자본규제 : 국제기준은없으나, 미국과유럽, 새로운정성평가는 2015~2016년시행예상 유럽, 새로운정량평가는 2018년시행예상 따라서규제시행영향과국제기준을고려하여재무건전성로드맵구성 - 영향평가결과, 자본규제와부채적정성평가의분리시행 - 국내재량권이없는시가평가에대비한부채적정성평가강화우선 - 자본규제의경우, 정성평가 정량평가 순으로준비 19

4.3. 자본규제 : 정성평가와정량평가 자본규제강화의방향성 : 지급여력유지와건전한시장경쟁 - 회사별리스크특성을반영하여리스크민감도제고 정량평가는위험세분화와정교화 - 위험관리유인은신뢰수준상향보다는회사별리스크특성반영이효과적 - 위험계수정교화와다양한위험반영이우선 - 충분한논의와영향평가를거쳐규제의불확실성을축소 정성평가를통한보험회사전사적위험관리 (ERM) 유인제고 - 국제적인추세는정성평가우선강화 20

4.4. 재무건전성규제로드맵제안 미국 / 유럽정성평가시행 IFRS4 phase II 시가평가시행 유럽정량평가시행 2014 2015 2016 2017 2018 2020 부채시가평가 할인율논의 부채적정성평가단계적강화 부채시가평가시행 자본규제정량 (RBC) 회사별특성반영방안마련 영향평가및의견수렴 신뢰수준상향 자본규제정성 (ORSA) ORSA 방안마련 ORSA 시행 RBC 비율 150% 관행폐지 21

4.5. 당면과제 [ 금융감독당국 ] 감독당국은시장조력자 자본규제에따른보완조치 - 채권상시발행 - 재보험, 파생상품활용확대 재무건전성관련규제간조율 - 보험료결정자율권보장 [ 보험회사 ] 시장주도자로서능동적대응 - 국제기준은중요한경쟁력 실질적인자본확충 - 이익의적극적인내부유보 전사적위험관리 (ERM) 강화 - 자사에맞는자본적정성확보 22

참고문헌 금융감독원 (2012), 보험회사위험기준자기자본제도 (RBC) 해설서, 업무참고자료. 금융감독원 (2012), 보험회사위험기준경영실태평가제도 (RAAS) 해설서, 업무참고자료. 김해식 조재린 (2012), 보험회사재무건전성감독체계개혁동향및시사점, 주간이슈, 179, 보험연구원. 문재익 (2007), 국제보험회계기준제정에따른리스크중심감독제도추진방향, 손해보험, 2월호, 손해보험협회. 장동식 (2009), Solvency II의리스크평가모형및측정방법연구, 보험연구원. 한국계리학회 (2012), Solvency 2 표준 내부모형도입기준에관한연구. 허창언 (2012), 보험회사지급여력제도정책방향, 손해보험, 10월호, 손해보험협회. Brahin, P.(2012), Solvency Modernization, Asia Insurance Review (www.asisinsurancereview.com) Campbell, M., P.(2012), Solvency II, NAIC SMI and Risk Management, Society of Actuaries(SOA) Annual Meeting. EIOPA(2011), EIOPA Report on the fifth Quantitative Impact Study (QIS5) for Solvency II, EIOPA-TFQIS5-11/001. Feldblum, S.(1996), NAIC Property/Casualty Insurance Company Risk-based Capital Requirements, Casualty Actuarial Society. IAIS ICP (http://www.iaisweb.org/icp-on-line-tool-689) IASB(2013), Overview of the Insurance Contract Project. KPMG(2011), Solvency II : A Closer Look at the Evolving Process Transforming the Global Insurance Industry. Vaughan, T.(2009), The Implication of Solvency II for U.S. Insurance Regulation, Networks Finance Institute, Indiana State University. 23

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