IFA.SOLVENCY2

Question 1

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

Answer 1

Events Not In Data

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

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

Question 2

describe how ENID can be identified (3)

Answer 2

• bring together parties who understand the 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 3

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

Answer 3

• may increase awareness of potential risks by senior management
• may assist in calculation of loading using frequency/severity methods
• may increase regulator confidence in company’s risk management (due to insights gleaned)