IFA.Solvency2

Question 1

What does the acronym ENID stand for in the context of Solvency 2

Answer 1

Events not in Data

Question 2

What is the “usual” definition of ENID

Answer 2

High-severity, low-probability events (often not in historical data)

Question 3

What is the “proposed” definition of ENID (sometimes called the “purpose” of ENID)

Answer 3

The balancing amount required to bring the best estimate before ENID up to an amount allowing for all possible future outcomes

Question 4

Describe how ENID can be identified

Answer 4

Bring together parties who understand the (re)insurer’s exposure

Their discussion should include factors affecting:
- Future settlements of past events
- Potential future claims relating to current exposures

Specific events to consider may include:
- Catastrophes, court awards, legislative changes

Question 5

Identify 3 elements to consider when determining an ENID loading

Answer 5

• Catastrophe claims
• Court rulings
• Legislative changes

Question 6

Identify an example of ENID with an unfavourable outcome

Answer 6

• A catastrophic event in an area where the insurer has material exposure
• A court ruling against the insurer

Question 7

Identify an example of ENID with a favourable outcome

Answer 7

• Withdrawal from market of a major competitor
• A court ruling for the insurer

Question 8

Why might it be beneficial for insurers to attempt to identify ENIDs (3)

Answer 8

• An insurer identifying ENID likely viewed favourably by regulator
• “Blue Sky Thinking” in the process will give participants a different perspective/view of the company and is likely to provide more insight
• Provide a basis for the calculation of ENID loading using frequency-severity approach