Implementing a new Solvency Regime in Mexico.

Transcription

1 Implementing a new Solvency Regime in Mexico. Insurance Supervision in America PANEL: MODERNIZATION OF REGULATION NORMA ALICIA ROSAS RODRÍGUEZ PRESIDENT, INSURANCE AND SURETY NATIONAL COMMISSION (CNSF-MÉXICO) September 8 th, 2016

2 Contents The Mexican insurance sector A brief overview The new solvency regime Implementation process Closing remarks Final comments

3 INSURANCE MARKET SIZE: DIRECT PREMIUM, (Billion Pesos; Constant Prices, December, 2015) 88.5% 6.5% REAL GROWTH AVERAGE REAL GROWTH RATE, Source : CNSF

4 INSURANCE UNDERTAKINGS, (101) 2015 (102) 2014 (105) 2013 (103) 2012 (104) 2011 (102) 2010 (99) 2009 (98) 2008 (100) 2007 (95) 2006 (91) 49 42% 52 58% MEXICAN OWNED INSURERS MARKET SHARE FOREIGN SUBSIDIARIES MARKET SHARE Source: CNSF

5 PORTFOLIO COMPOSITION: LOB, JUNE 2016 Life, 43.6% Auto, 19.1% P&C (excluding Auto), 18.0% Pensions, 4.3% A&H, 15% Source: CNSF

6 MARKET CONCENTRATION (CONCENTRATION RATIO, CR 5 & HERFINDAHL INDEX; JUNE, 2016) CR5 Index Herfindahl Index (HHI) 80% 10% 70% 7.6% 6.2% 60% 50% 53.9% 5% 40% 45.0% 30% %

7 MARKET CONCENTRATION BY LOB (CONCENTRATION RATIO, CR 5 ; JUNE, 2016) Life: (CR5=66.6%) Monterrey 8.3% BBVA Bancomer 8.8% GNP 9.7% Banamex 10.3% Metlife 29.5% Resto 33.4% 0.0% 40.0% 80.0% Resto Sura Profuturo GNP BBVA Bancomer Pensiones Banorte Pensions from Social Security: (CR4=99.8%) 0.2% 8.7% 18.2% 35.8% 37.1% 0.0% 40.0% 80.0% Accidents & Health: (CR5=69.3%) P&C w/o auto: (CR5=37.9%) Auto: (CR5=66.0%) Banorte Monterrey Metlife AXA GNP Resto 4.0% 10.7% 13.7% 16.1% 24.8% 30.7% Grupo Mexicano Mapfre Inbursa Banorte Axa Resto 6.7% 7.2% 7.3% 7.7% 9.0% 62.1% Banorte ABA AXA GNP Quálitas Resto 6.2% 7.0% 10.9% 12.5% 29.4% 34.0% 0.0% 40.0% 80.0% 0.0% 40.0% 80.0% 0.0% 40.0% 80.0%

8 MARKET GROWTH: PENETRATION INDEX FORECAST, 2030 PENETRATION INDEX DYNAMIC GDP GROWTH (5%) MODERATE GDP GROWTH (3%) INERTIAL GDP GROWTH (1.9%) 6% 5.1% 4% 4.2% 3.8% 2.1% 2% 0% SOURCE: CNSF

9 Contents The Mexican insurance sector A brief overview The new solvency regime Implementation process Closing remarks Final comments

10 NEW MEXICAN INSURANCE LAW Process began in 2007; In force: April 2015 First (Mandatory) Quantitative Request: March 2016 QUANTITATIVE ELEMENTS REVISION AND CONTROL MARKET DISCIPLINE PILAR I PILAR 2 PILAR 3 Technical provisions based on BEL methods and risk margin concept. Standard model and internal models for the capital requirements calculation. Risk aggregation and mitigation. Own funds to cover solvency capital requirement. Strengthening of corporate governance practices. Own Risk and Solvency Assessment (ORSA). Supervisory review process: strengthening of CNSF s risk based supervision. Regulatory reporting. Transparency and public disclosure as a mechanism to enhance market discipline.

11 SOLVENCY I MEXICO: FORMER SOLVENCY REGIME MEXICO: NEW SOLVENCY REGIME Valuation Statutory Market Consistent Market Consistent Underwriting Risk Financial Risk Asset Liability Management (ALM) Risk Operating Risk Risk Modeling Risk Factors Stochastic Models Risk Aggregation Risk Measure = VaR (97.5%) = VaR (99.5%) Stress Testing Technical Provisions Unearned Premium Sufficiency Methods Bel + Risk Margin Investments Quantitative Limits Quantitative Limits Investment Policy Reinsurance Credit Risk Credit Risk Corporate Governance Information Disclosure

12 FINAL IMPLEMENTATION PROCESS Real April 2013 April 2015 IMPLEMENTATION MEASURES (CUSF) SECONDARY REGULATION Secondary regulation derived from the new Insurance Law. It comprises all the regulatory measures that are in force since April 4, A comprehensive consultation process was introduced. QUALITATIVE IMPACT STUDIES (EIC) GAP ANALYSIS Gap analysis with respect to the corporate governance and disclosure requirements considered in the new Insurance Law. A total of 5 studies complemented the secondary regulation s consultation process. QUANTITATIVE IMPACT STUDIES (EIQ) MODELS VALIDATION AND CALIBRATION Validation and calibration of the models used as part of the Standard Model for the SCR calculation. A total of 5 studies (including the Final Test) complemented the secondary regulation s consultation process.

13 QUANTITATIVE IMPACT STUDIES (EIQ) ECONOMIC BALANCE SHEET RISK CATEGORIES PROBABILISTIC MEASURE Underwriting risk Market value of assets Economic net worth Economic value of liabilities SCR Risk aggregation Market risk Credit risk Counterparty risk ALM risk Operational risk Market consistent valuation of the different items considered in the balance sheet. An appropriate asset-liability matching reduces possible volatility in the balance sheet. It considers all risks an insurer is exposed as part of its operation. There is risk aggregation (underwriting and financial risks) in order to reflect the benefits from diversification, mitigation and compensation of risks. Risk measure based on a VaR level of 99.5%. A 0.5% default probability in a one year time horizon.

14 QUANTITATIVE IMPACT STUDIES (EIQ) FINAL TEST OUTCOME Regulatory Impact Previous Methodology Assets 691, ,811 6,071 Liabilities + SCR 648,602 42,616 Final Test Assets 679, ,882-11, ,784 Liabilities + SCR 637,432 42, , , , , , ,000 Millions SOURCE: CNSF

15 Contents The Mexican insurance sector A brief overview The new solvency regime Implementation process Closing remarks Final comments

16 FINAL COMMENTS Some remarks after an initial aftermath. Structure of Regulator In accordance to the new regulatory framework: sufficient staff with the required capacities. Flexible; according to the development and implementation processes; independence. Multidisciplinary; effective communication and coordination between areas and to senior staff. About Institutions Impact studies, workshops, documents; institutional learning of the processes. Multidisciplinary; communication and effective coordination between areas and to senior staff.

17 FINAL COMMENTS Some remarks after an initial aftermath. Economic Balance Transitional release period. Valuation consistency between assets and liabilities; surplus accounts, taxes. Accounting criteria; negotiations with stakeholders and accordance with third parties. Capital Requirements Review of available information. Definition of risks and incentives. Periodicity; quarterly calculation. Before modeling

18 FINAL COMMENTS Some remarks after an initial aftermath. Implementation Impact Studies; mandatory vs volunteer basis, consideration of resources. Application; simultaneous vs differentiated, consideration of resources. Feedback Period. Flexible regulation; subsequent amendments.

19 Implementing a new Solvency Regime in Mexico. NORMA ALICIA ROSAS RODRÍGUEZ PRESIDENT, INSURANCE AND SURETY NATIONAL COMMISSION (CNSF-MÉXICO) nrosas@cnsf.gob.mx