Source: MEIR eDaily
The Supervisory Authority of Insurance and Social Security (ACAPS) is working on introducing solvency margins based on risk, according to Mr. Hassan Boubrik, Chairman of the regulatory agency.
Currently, insurance companies show comfortable solvency ratios that do not reflect the real situation fully because only underwriting risk is taken into account.
Commenting on risk-based solvency, Mr. Boubrik said: “The first simulations show that margins are narrowing sharply.” Without going into detail, he revealed that two operators have failed the simulation tests, reported L’Economiste. At the minimum, these insurance companies will have to increase their capital and review their investment policy.
He said that the implementation of the risk-based solvency framework is still in its infancy.
Beyond the risk to service delivery, insurers are large investors and the risks arising from their investments are not negligible. The proportion of listed equities in the investment portfolios of insurers is between 40% and 45%, much higher than in benchmark markets. Hence, it is important that the calculation of the solvency margin takes into account market risk as well as liquidity and operational risk, he said.
“If the sluggish stock market continues, it will be worrying for insurance companies,” said Mr. Boubrik. The goal is to push the companies to scale back equity investments. However, the rebalancing of investment portfolios should be carried out gradually, he added.
