SLIDE 1
Actuarial Society 2015 Convention 17 – 18 November 2015
Medical Scheme Balance Sheet
2 Revaluation reserve Market value
- f assets
25% solvency Technical Reserves Scheme reserves Liabilities
An Alternative Solvency Regime for Medical Schemes in South Africa - - PowerPoint PPT Presentation
An Alternative Solvency Regime for Medical Schemes in South Africa - - PowerPoint PPT Presentation
An Alternative Solvency Regime for Medical Schemes in South Africa Gary Scott and Adam Lowe Actuarial Society 2015 Convention 17 18 November 2015 Medical Scheme Balance Sheet Revaluation reserve Scheme 25% reserves solvency Market
SLIDE 2
SLIDE 3
Actuarial Society 2015 Convention 17 – 18 November 2015
SAM Regulatory Balance Sheet
Market value
- f assets
SCR Technical Reserves Free assets MCR 3
SLIDE 4
Actuarial Society 2015 Convention 17 – 18 November 2015
Proposed Regulatory Balance Sheet
Asset Risk Reserve Market value
- f assets
SCR Technical Reserves Scheme reserves Liabilities 4
SLIDE 5
Actuarial Society 2015 Convention 17 – 18 November 2015
Calculation of SCR
Provision for operating deficit Claims (and expenses) variability risk Catastrophe risk
- arena or stadium accident
- office block accident
Outstanding claims reser ve risk Operational risk
𝑄𝑠𝑝𝑤𝑗𝑡𝑗𝑝𝑜 𝑔𝑝𝑠 𝑐𝑣𝑒𝑓𝑢𝑓𝑒 𝑒𝑓𝑔𝑗𝑑𝑗𝑢 = 𝑁𝐵𝑌 −𝑄𝑠𝑗𝑝𝑠 𝑧𝑓𝑏𝑠 𝑝𝑞𝑓𝑠𝑏𝑢𝑗𝑜 𝑞𝑝𝑡𝑗𝑢𝑗𝑝𝑜 + 𝑇𝑓𝑏𝑡𝑝𝑜𝑏𝑚𝑗𝑢𝑧 𝑏𝑚𝑚𝑝𝑥𝑏𝑜𝑑𝑓, 0
SCR 5
SLIDE 6
Actuarial Society 2015 Convention 17 – 18 November 2015
Calculation of SCR
SCR
Provision for operating deficit Claims (and expenses) variability risk Catastrophe risk
- arena or stadium accident
- office block accident
Outstanding claims reser ve risk Operational risk
𝑇𝐷𝑆𝐷𝑊 = 𝑂𝐷 ∗ 𝜍(𝜏𝐷𝑊) 𝑥ℎ𝑓𝑠𝑓 𝑂𝐷 = 𝑏𝑜𝑜𝑣𝑏𝑚 𝑜𝑓𝑢 𝑑𝑝𝑜𝑢𝑠𝑗𝑐𝑣𝑢𝑗𝑝𝑜 𝑗𝑜𝑑𝑝𝑛𝑓 𝜏𝐷𝑊 = 𝑡𝑢𝑏𝑜𝑒𝑏𝑠𝑒 𝑒𝑓𝑤𝑗𝑏𝑢𝑗𝑝𝑜 𝑝𝑔 𝑑𝑚𝑏𝑗𝑛𝑡 𝑠𝑏𝑢𝑗𝑝 (𝑏𝑡 𝑒𝑓𝑔𝑗𝑜𝑓𝑒 𝑐𝑓𝑚𝑝𝑥) 𝜍 𝜏𝐷𝑊 = 𝑓𝑂0.995∗ ln 𝜏𝐷𝑊 2+1 𝜏𝐷𝑊2 + 1 − 1 𝑥ℎ𝑓𝑠𝑓 𝑂0.995 = 99.5𝑢ℎ 𝑞𝑓𝑠𝑑𝑓𝑜𝑢𝑗𝑚𝑓 𝑝𝑔 𝑏 𝑡𝑢𝑏𝑜𝑒𝑏𝑠𝑒 𝑜𝑝𝑠𝑛𝑏𝑚 𝑒𝑗𝑡𝑢𝑠𝑗𝑐𝑣𝑢𝑗𝑝𝑜 𝜏𝐷𝑊 = 1 𝑂𝐷𝑏𝑤𝑓 ∗ 1 𝑂 − 1 ∗ 1 𝑂𝐷𝑧𝑓𝑏𝑠 ∗ 𝑆𝐷𝑚𝑧𝑓𝑏𝑠 − 𝑂𝐷𝑧𝑓𝑏𝑠 ∗ 𝐵𝐷𝑆
2 𝑧𝑓𝑏𝑠𝑡
𝑥ℎ𝑓𝑠𝑓 𝑂𝐷 = 𝑜𝑓𝑢 𝑑𝑝𝑜𝑢𝑠𝑗𝑐𝑣𝑢𝑗𝑝𝑜 𝑗𝑜𝑑𝑝𝑛𝑓 𝑆𝐷𝑚 = 𝑠𝑗𝑡𝑙 𝑑𝑚𝑏𝑗𝑛𝑡 𝑗𝑜𝑑𝑣𝑠𝑠𝑓𝑒 𝑂 = 𝑜𝑣𝑛𝑐𝑓𝑠 𝑝𝑔 𝑧𝑓𝑏𝑠𝑡′𝑒𝑏𝑢𝑏 𝐵𝐷𝑆 = 𝑏𝑤𝑓𝑠𝑏𝑓 𝑑𝑚𝑏𝑗𝑛𝑡 𝑠𝑏𝑢𝑗𝑝 𝑏𝑑𝑠𝑝𝑡𝑡 𝑏𝑚𝑚 𝑧𝑓𝑏𝑠𝑡
6
SLIDE 7
Actuarial Society 2015 Convention 17 – 18 November 2015
Calculation of SCR
SCR
Provision for operating deficit Claims (and expenses) variability risk Catastrophe risk
- arena or stadium accident
- office block accident
Outstanding claims reser ve risk Operational risk
𝑇𝐷𝑆𝑑𝑏𝑢 ,𝑏𝑠𝑓𝑜𝑏 = 𝑇 ∗ 𝐽𝑞 ∗ 𝑦𝑞 ∗ 𝐹𝑞 ∗ 𝑁𝑇𝑞 𝑥ℎ𝑓𝑠𝑓 𝑇 = 50% 𝑝𝑔 𝑑𝑏𝑞𝑏𝑑𝑗𝑢𝑧 𝑝𝑔 𝑚𝑏𝑠𝑓𝑡𝑢 𝑡𝑢𝑏𝑒𝑗𝑣𝑛 𝑗𝑜 𝑢ℎ𝑓 𝑑𝑝𝑣𝑜𝑢𝑠𝑧 𝐽𝑞 = 𝑗𝑜𝑡𝑣𝑠𝑏𝑜𝑑𝑓 𝑞𝑓𝑜𝑓𝑢𝑠𝑏𝑢𝑗𝑝𝑜 𝑦𝑞 = 𝑞𝑠𝑝𝑞𝑝𝑠𝑢𝑗𝑝𝑜 𝑝𝑔 𝑏𝑔𝑔𝑓𝑑𝑢𝑓𝑒 𝑞𝑓𝑝𝑞𝑚𝑓 𝑗𝑜𝑘𝑣𝑠𝑓𝑒 𝐹𝑞 = 𝑓𝑦𝑞𝑝𝑡𝑣𝑠𝑓 𝑗. 𝑓. 𝑏𝑤𝑓𝑠𝑏𝑓 𝑑𝑝𝑡𝑢 𝑝𝑔 𝑢𝑠𝑓𝑏𝑢𝑛𝑓𝑜𝑢 𝑁𝑇𝑞 = 𝑛𝑏𝑠𝑙𝑓𝑢 𝑡ℎ𝑏𝑠𝑓 𝑝𝑔 𝑡𝑑ℎ𝑓𝑛𝑓 𝑇𝐷𝑆𝑑𝑏𝑢 ,𝑑𝑝𝑜𝑑 = 𝑇 ∗ 𝑦𝑞 ∗ 𝐹𝑞 𝑥ℎ𝑓𝑠𝑓 𝑇 = 𝑚𝑏𝑠𝑓𝑡𝑢 𝑑𝑝𝑜𝑑𝑓𝑜𝑢𝑠𝑏𝑢𝑗𝑝𝑜 𝑝𝑔 𝑛𝑓𝑛𝑐𝑓𝑠𝑡 𝑗𝑜 𝑏 𝑡𝑗𝑜𝑚𝑓 𝑐𝑣𝑗𝑚𝑒𝑗𝑜 𝑦𝑞 = 𝑞𝑠𝑝𝑞𝑝𝑠𝑢𝑗𝑝𝑜 𝑝𝑔 𝑏𝑔𝑔𝑓𝑑𝑢𝑓𝑒 𝑞𝑓𝑝𝑞𝑚𝑓 𝑗𝑜𝑘𝑣𝑠𝑓𝑒 𝐹𝑞 = 𝑓𝑦𝑞𝑝𝑡𝑣𝑠𝑓 𝑗. 𝑓. 𝑏𝑤𝑓𝑠𝑏𝑓 𝑑𝑝𝑡𝑢 𝑝𝑔 𝑢𝑠𝑓𝑏𝑢𝑛𝑓𝑜𝑢 𝑇𝐷𝑆𝑑𝑏𝑢 = 𝑇𝐷𝑆𝑑𝑏𝑢 ,𝑏𝑠𝑓𝑜𝑏
2 + 𝑇𝐷𝑆𝑑𝑏𝑢 ,𝑑𝑝𝑜𝑑 2
7
SLIDE 8
Actuarial Society 2015 Convention 17 – 18 November 2015
Calculation of SCR
Provision for operating deficit Claims (and expenses) variability risk Catastrophe risk
- arena or stadium accident
- office block accident
Outstanding claims reser ve risk Operational risk
SCR
𝑇𝐷𝑆𝐽𝐶𝑂𝑆 = 𝑂𝐷 ∗ 𝜍(𝜏𝐽𝐶𝑂𝑆) 𝑥ℎ𝑓𝑠𝑓 𝑂𝐷 = 𝑏𝑜𝑜𝑣𝑏𝑚 𝑜𝑓𝑢 𝑑𝑝𝑜𝑢𝑠𝑗𝑐𝑣𝑢𝑗𝑝𝑜 𝑗𝑜𝑑𝑝𝑛𝑓 𝜏𝐽𝐶𝑂𝑆 = 𝑡𝑢𝑏𝑜𝑒𝑏𝑠𝑒 𝑒𝑓𝑤𝑗𝑏𝑢𝑗𝑝𝑜 𝑝𝑔 𝑔𝑝𝑠𝑓𝑑𝑏𝑡𝑢 𝑏𝑑𝑑𝑣𝑠𝑏𝑑𝑧 𝜍 𝜏𝐽𝐶𝑂𝑆 = 𝑓𝑂0.995∗ ln 𝜏𝐽𝐶𝑂𝑆 2+1 𝜏𝐽𝐶𝑂𝑆 2 + 1 − 1
8
SLIDE 9
Actuarial Society 2015 Convention 17 – 18 November 2015
Calculation of SCR
SCR
Provision for operating deficit Catastrophe risk
- arena or stadium accident
- office block accident
Operational risk
𝑇𝐷𝑆𝑃 = 3% 𝑝𝑔 𝑠𝑝𝑡𝑡 𝑑𝑝𝑜𝑢𝑠𝑗𝑐𝑣𝑢𝑗𝑝𝑜𝑡 + 3% 𝑝𝑔 𝑏𝑜𝑧 𝑗𝑜𝑑𝑠𝑓𝑏𝑡𝑓 𝑗𝑜 𝑠𝑝𝑡𝑡 𝑑𝑝𝑜𝑢𝑠𝑗𝑐𝑣𝑢𝑗𝑝𝑜𝑡 𝑝𝑤𝑓𝑠 20%
Outstanding claims reser ve risk
9
Claims (and expenses) variability risk
SLIDE 10
Actuarial Society 2015 Convention 17 – 18 November 2015
Calculation of SCR
10
SLIDE 11
Actuarial Society 2015 Convention 17 – 18 November 2015
Calculation of Asset Risk Reserve
Asset Risk Reserve
Asset return risk Credit concentration risk
11
SLIDE 12
Actuarial Society 2015 Convention 17 – 18 November 2015
Proposed Regulatory Balance Sheet
Asset Risk Reserve Market value
- f assets
SCR Technical Reserves Scheme reserves 12
SLIDE 13
Actuarial Society 2015 Convention 17 – 18 November 2015
Proposed Economic Balance Sheet
Asset Risk Reserve Market value
- f assets
SCR Technical Reserves Scheme reserves Reserve target 13 Technical Reserves
SLIDE 14
Actuarial Society 2015 Convention 17 – 18 November 2015
Proposed SCR versus Current Solvency
14
SLIDE 15
Actuarial Society 2015 Convention 17 – 18 November 2015
Next Steps?
15